16 September 2008

CESR: Proposal on CRA - intensity of supervision that can possibly not be met

The goal for a potential regulation should be the supervision and monitoring of principles, CESR states and criticizes that the proposal does not clarify the nature of this supervision.

CESR notes in its response to the Commission consultation on Credit Rating Agencies that the formulation of many of the substantive requirements in terms of strict obligations to be monitored by the Competent Authorities exposes them to an intensity of supervision that can possibly not be met.

 

The goal for a potential regulation should be the supervision/monitoring of principles and processes that a CRA undertakes to generate a proper rating rather than influencing the methodology a CRA uses, CESR states. “Some provisions might restrict the analytical independence of the CRAs for their ratings”, the Committee continues. “It should be made clear that the European framework does not regulate the substance of credit ratings. CESR considers that the goal of the supervision should not be to judge individual ratings”.

 

CESR also criticizes that the proposal does not clarify what is the nature of this supervision. Also, several members recalled CESR's previous advice and declared their preference for a global solution, based on enhanced self-regulation.

 

On the scope it is useful to add an investor perspective, stating that European issuers cannot request ratings except from registered CRAs when offering their securities in the EU, CESR states.

 

However, CESR also underlines that a detailed analysis and comparison should be made of the use of credit ratings and the authorisation or registration requirements and procedures used in the regulations of credit institutions and insurance companies.

 

The Committee also calls for the need to duly taking into account such international dimension as well as the measures already adopted in other jurisdictions with the intention to avoid inconsistencies and an un-level playing field. CESR is in particular targeting on differences with the SEC requirements and the IOSCO code.

 

The Commission should also refrain from adopting any measures that might have anticompetitive consequences taking into account the oligopolistic features of the rating business.

 

Full response

© CESR - Committee of European Securities Regulators