Stricter Rules For Credit Rating Agencies To Enter Into Force

According to a press release published today by the European Commission, with effect from 20 June credit rating agencies will have to follow stricter rules which will make them more accountable for their actions. The new rules also aim to reduce over-reliance on credit ratings while at the same time improving the quality of the rating process. Credit rating agencies will have to be more transparent when rating sovereign states.

Credit rating agencies (CRAs) are major players in today's financial markets and their actions can have a significant direct impact on investors, borrowers, issuers and governments. For example, a downgrade can have consequences on the capital a bank must hold and a downgrade of sovereign debt can make a country's borrowing more expensive. Despite the adoption of European legislation on credit rating agencies in 2009 and 2010, the euro debt crisis led the European Commission to put forward proposals in November 2011 to reinforce the regulatory