CESR has assessed the ability of the Japanese framework to achieve the main EU requirements, and finds it comprehensive so makes no recommnedations. The areas include corporate governance, disclosure and conflicts of interest management.
This document sets out the technical advice of CESR in relation to the equivalence between the Japanese legal and supervisory framework and the EU regulatory regime for credit rating agencies, in accordance with the European Commission’s mandate of 12th June 2009.
This assessment is based on a review of the Financial Services Agency of Japan’s unofficial published translations of the relevant parts of the legal texts in relation to credit rating agencies, namely (i) the Financial Instruments and Exchange Act (Act No 25 of 1948) related to the Regulation of Credit Rating Agencies, (ii) the Cabinet Office Ordinance on Financial Instruments etc related to Regulation on Credit Rating Agencies (Ordinance No 52 of 2007), (iii) the Cabinet Office Ordinance on Definitions under Article 2 of the Financial Instruments and Exchange Act related to Regulation on Credit Rating Agencies (Ordinance No 14 of 1993), and (iv) the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc (Supplement) Guidelines for Supervision of Credit Rating Agencies, as well as on explanations of relevant provisions provided by the staff of the JFSA.
The Japanese legal and regulatory framework for credit rating agencies, was introduced on the 1st of April 2010, and is intended to replace the existing designation system for credit rating agencies that Japan has had for nearly 20 years, which will expire by the 31st of December 2010.
CESR concludes that, overall, the Japanese legal and supervisory framework is equivalent to the EU regulatory regime for credit rating agencies in terms of achieving what CESR considers to be the overall objective of: “assuring that users of ratings in the EU would benefit from equivalent protections in terms of the credit rating agencies integrity, transparency, good governance and reliability of the credit rating activities”.
In coming to this conclusion, CESR has grouped the requirements of the EU Regulation into seven areas, in relation to each of which CESR has assessed the ability of the Japanese legal and supervisory framework to achieve the main objectives of the relevant EU requirements.
CESR considers the Japanese framework to be comprehensive and in many instances similar to the EU Regulation.
There are no areas where the Japanese requirements do not meet the objectives of the EU requirements there are no short comings, and as such CESR has no recommendations to make in respect of the Japanese legal and supervisory framework as a whole for the purposes of an equivalence determination by the European Commission.
In accordance with the mandate, CESR has not taken into account any consideration of a political nature.
These seven areas are:
1. The scope of the regulatory and supervisory framework
2. Corporate governance
3. Conflicts of interest management
4. Organisational requirements
5. Quality of methodologies and quality of ratings
6. Disclosure
7. Effective supervision and enforcement.
GLOBAL ASSESSMENT
CESR points out that it considers that the Japanese legal and supervisory framework for credit rating agencies is be very comprehensive and in many respects similar to that of the EU Regulation.
There are no areas where the Japanese requirements do not meet the objectives of the EU requirements, there are no shortcomings, and as such CESR has no recommendations to make in respect of the regime as a whole for the purposes of an equivalence determination by the European Commission.
CESR points out that its conclusion is based on a review of Japanese Financial Services Agency’s unofficial published translations of the relevant parts of the legal texts in relation to credit rating agencies, namely (i) the Financial Instruments and Exchange Act (Act No 25 of 1948) related to the regulation of Credit Rating Agencies, (ii) the Cabinet Office Ordinance on Financial Instruments etc related to Regulation on Credit Rating Agencies (Ordinance No 52 of 2007), (iii) the Cabinet Office Ordinance on Definitions under Article 2 of the Financial Instruments and Exchange Act related to Regulation on Credit Rating Agencies (Ordinance No 14 of 1993), and (iv) the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc (Supplement) Guidelines for Supervision of Credit Rating Agencies, as well as on explanations of relevant provisions provided by the staff of the JFSA.
© CESR - Committee of European Securities Regulators
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