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 framework
and deal with outstanding weaknesses. These are the basis for the
new rules that enter into force on 20 June.
The new regulatory package consists of Regulation 462/2013 of the
European Parliament and of the Council of 21 May 2013 amending
Regulation (EC) No 1060/2009 on credit rating agencies, together
with Directive 2013/14/EC of the European Parliament and of the
Council of 21 May 2013 amending Directive 2003/41/EC on the
activities and supervision of institutions for occupational
retirement provision, Directive 2009/65/EC on the coordination of
laws, regulations and administrative provisions relating to
undertakings for collective investment in transferable securities
(UCITS) and Directive 2011/61/EU on Alternative Investment Funds
Managers in respect of over-reliance on credit ratings.
For a complete analysis of the new changes and a detailed
description of the new Regulation and Directives please visit http://europa.eu/rapid/press-release_IP-13-555_en.htm
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