Accurate credit ratings of states, companies and financial products are important to well-functioning markets and financial stability. The new rules are intended to improve credit ratings so that they reflect the true credit risk. The rules will also reduce dependency on credit ratings – both for investors and in financial regulation. The new rules will furthermore improve the possibility for investors and issuers to hold a credit rating agency liable if it fails to comply with the rules.
Minister for Economic Affairs and the Interior, Margrethe Vestager, says: "I am very glad that all Member States have agreed to a strengthening of the Regulation on credit rating agencies. The crisis has demonstrated that supervision and regulation of credit rating agencies is highly important – and with the compromise agreed today we can be more confident that credit ratings of both states and financial products are issued on a professional and qualified basis."
Minister of Business and Growth, Ole Sohn, says: "Today the market for credit rating agencies is dominated by a few, large actors. The new agreement is therefore a positive step that strengthens the possibilities for more actors to enter the market and reduces overreliance on ratings in the financial system. With the new rules we are also reducing the risk of conflicts of interest between a credit rating agency and its clients, and improving transparency around credit ratings, pricing policies, and so on."
During the negotiations, one of the central issues has been whether to introduce rules to make issuers switch credit rating agency after a certain period of time. Many Member States have been concerned that such rules would not function in practice. Therefore, the Danish Presidency has prepared a compromise where these rules are limited to so-called re-securitisations, which are particularly complex structured financial products, where it may be particularly difficult for investors to evaluate the true credit risk.
The Danish Presidency will now begin negotiations with the European Parliament.
Press release
© European Council
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