The European Commission has put forward a proposal for regulation of credit rating agencies, as part of a package to deal with the financial crisis. The new rules are designed to ensure high quality credit ratings which are not tainted by conflicts of interest. 'I want Europe to adopt a leading role in this area,’ says Internal Market and Services Commissioner Charlie McCreevy. ‘Our proposal goes further than the rules which apply in other jurisdictions. These very exacting rules are necessary to restore the confidence of the market in the ratings business in the European Union.’
The proposal lays down conditions for the issuance of credit ratings, to restore market confidence and increase investor protection. It introduces a registration procedure for credit rating agencies to enable European supervisors to control the activities of rating agencies whose ratings are used by credit institutions, investment firms, insurance, assurance and reinsurance undertakings, collective investment schemes and pension funds within the Community.
Credit rating agencies will have to comply with rigorous rules to make sure (i) that ratings are not affected by conflicts of interest, (ii) that credit rating agencies remain vigilant on the quality of the rating methodology and the ratings and (iii) that credit rating agencies act in a transparent manner.
The proposal is available at:
http://ec.europa.eu/internal_market/securities/agencies/index_en.htm
