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While the CRA3 proposals contain widely supported aspects promoting the reduction of regulatory reliance on CRA ratings, a number of other aspects of CRA3 are cause for concern, especially since some of the most far-reaching proposals in CRA3 have not been consulted upon. It is considered by industry and various policy-makers that the CRA3 proposals have significant potential unintended consequences at a time of great uncertainty in financial markets.
As only legal entities established in the EU could be registered in accordance with the Regulation, specific treatment has been established for credit ratings issued outside the EU so that such credit ratings could be used for regulatory purposes. Several conditions apply for this “endorsement” process, including the requirement that the third country CRA oversight regime be either “equivalent” (allowing CRAs established outside the EU to be “certified”), or be “as stringent as” the Regulation. From end April 2012, international CRAs can only endorse credit ratings issued outside the EU from locations that are eligible for endorsement – currently being the Japanese, Australian, Canadian, Hong Kong, Singapore and US regimes. Credit ratings issued in jurisdictions ineligible for endorsement cannot be used for regulatory purposes in the EU.
As of 1 March 2012, 15 CRAs had been registered with ESMA and one CRA has been certified. ESMA commenced inspections of the three largest CRAs following their registration on 31 October 2011. In accordance with CRA2, ESMA published a CRA supervision report on 22 March.
In November 2010, the Commission launched a consultation on the European regulatory regime for CRAs, in large part triggered by the unfolding sovereign debt crisis. Ultimately this led to the Commission’s adoption of CRA3 on 16 November 2011, though, importantly, some of the most far-reaching measures did not form part of the Commission’s consultation exercise.
ECON held its first exchange of views on CRA3 on 21 December and held a public hearing on 24 January. Rapporteur Leonardo Domenici presented his report on 29 February to ECON. The ECON vote on CRA3 is currently scheduled for 21 May.