Credit Rating Agencies Directive

Credit Rating Agencies were criticised for their role in the market turmoil of 2008, in particular around the high quality ratings that had been given to complex financial instruments, including those backed by US subprime debt. The European Commission therefore consulted on an EU regulatory regime for CRAs, and published a proposed Regulation on 12 November 2008.

On 7 December 2009 the EC Regulation on Credit Rating Agencies came into force. It introduced a harmonised approach to the regulation of credit rating activities in the European Union and established a registration system for credit rating agencies.

In June 2010, the European Commission adopted a proposal to amend the CRA Regulation in order to:

Introduce a new regime for improving the transparency of ratings given to complex, structured finance instruments. The new rules will introduce disclosure requirements to increase the amount of information available to all competing agencies and provide investors with greater choice. This is also aimed at encouraging greater competition in the market by reducing the barriers to entry for potential new participants.
Bring the direct supervisory oversight of credit rating agencies under the auspices of the new European Securities and Markets Authority (ESMA). ESMA forms part of the new European Supervision structure for financial services, which aims to strengthen cross-border regulation and increase the quality and consistency of regulation across the EU. ESMA will be responsible for approving the registration of CRAs, their ongoing supervision, and taking appropriate enforcement action.

The European Commission’s proposal can be downloaded as follows:

Amending EU supervision of Credit Rating Agencies (June 2010) (PDF) (opens in new browser window)

Credit Rating Agencies Directive

Share