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Credit rating agencies

Credit rating agencies provide independent opinions on the creditworthiness of an entity, a debt or financial obligation, or financial instrument. This Regulation provides for a new legal regime to monitor this activity.


Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (Text with EEA relevance).


This Regulation aims at regulating the business of credit rating agencies with a view to protecting investors and European financial markets against the risk of malpractice. It lays down the conditions for issuing credit ratings, as well as rules related to registering and monitoring credit rating agencies.

Which credit ratings does the Regulation apply to?

This Regulation applies to credit ratings which are issued by credit rating agencies registered in the European Union (EC) and which are communicated to the public or distributed by subscription.

How are credit ratings used?

Credit ratings issued by credit rating agencies based in the EU are used by investors, borrowers, issuers and public administrations to help them make investment and financial decisions. These ratings may be used by the banks as a reference for calculating their capital requirements for solvency purposes or to help investors to assess the risks in their investment activity.

Two procedures allow the use, in the EU, of ratings issued by credit agencies established in third countries. Firstly, credit rating agencies have the option to give their endorsement to credit ratings issued outside of the EU, on the condition that:

  • the credit rating agency has carried out preliminary checks and can continue to demonstrate to the European Securities and Markets Authority (ESMA) that the credit ratings meet legislative requirements which are at least as strict as those applicable in the EU;
  • the ability of ESMA to assess and monitor compliance with the requirements is not limited;
  • the credit rating agency shall provide ESMA with all the information it requires;
  • the credit rating agency established in the third country is authorised or registered, and is subject to supervision, in that third country;
  • a cooperation arrangement has been concluded between ESMA and the relevant competent authority of the credit rating agency established in a third country.

Secondly, ratings issued by a small credit rating agency established in a third country, but not established in the EU, can be used in the European Union on the condition that:

  • the credit rating agency is authorised or registered in and is subject to supervision in that third country;
  • the Commission has adopted an equivalence decision recognising the legal and supervisory framework for ratings agencies in the third country;
  • the cooperation arrangements with the third country exist and are operational;
  • the credit ratings issued by the credit rating agency and its credit rating activities are not of systemic importance to the financial stability or integrity of the financial markets of one or more Member States;
  • the credit rating agency is certified in the Union.

Credit rating agencies may request certification from ESMA.

Under which conditions are credit ratings issued?

The issuing of credit ratings should not be affected by any conflict of interest or business relationship. In order to ensure this, credit rating agencies are subject to specific organisational and operational requirements. The administrative or supervisory board of the agency shall ensure independence of the rating process. It shall ensure that conflicts of interest are properly identified, managed and disclosed, and finally that the credit rating agency complies with the requirements of the Regulation. ESMA may however exempt a credit agency from certain requirements in view of the nature, scale and complexity of its business.

The methodologies of credit rating agencies and the descriptions of models and key rating assumptions, such as mathematical or correlation assumptions, are published in a manner permitting comprehensive review. In this way, agencies shall guarantee the quality of the credit ratings that they produce, and the transparency of methods used.

The credit rating agencies shall ensure regular monitoring of credit ratings and shall review this at least once a year. They shall produce general and periodic disclosures, as well as a transparency report. Agencies shall send data to ESMA on their past performance so that it can be made available to the public.

How is monitoring of credit rating activities carried out?

Credit rating agencies established in the EU must register with ESMA. They will send their application for registration to ESMA, providing, amongst other things, information on their headquarters, their legal status, their methods of issuing ratings and their policies and procedures on managing conflicts of interest. ESMA has 45 working days to examine their application.

In the case of an application for registration made by a group of agencies, ESMA decides whether to grant or refuse registration. In this case, it has 55 working days to reach a decision.

ESMA is responsible for drawing up guidelines in consultation with the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA). It is required to publish an annual report on the application of this Regulation.

ESMA carries out ongoing surveillance of credit rating agencies, particularly of their rating methodologies. It must not interfere with the content of the credit ratings or with the methodologies used by the credit rating agencies. If it identifies an infringement (listed in Annex III), ESMA appoints an independent investigator to open an inquiry, at the end of which a dossier is produced presenting his/her conclusions. ESMA then decides whether to fine the credit rating agency or to impose one of the following penalties:

  • withdraw the registration of the credit rating agency;
  • temporarily prohibit the agency from issuing credit ratings;
  • suspend the use of the credit ratings;
  • require the agency to stop the infringement;
  • issue public notices.

ESMA is required to cooperate with EBA, EIOPA and the competent authorities and sectoral competent authorities with regard to exchanging information. It has the right to send confidential information to the following bodies:


The 2008 financial crisis and the absence of national regulations led the European Commission to establish common rules in order to better regulate the activities of credit rating agencies. In February 2009, the “Larosière” Expert Group highlighted the need to strengthen the framework for monitoring the financial sector, which enabled the creation of a European System of Financial Supervision (ESFS) comprising three European supervisory authorities and a Systemic Risk Board. The role of ESMA also enables the monitoring of credit rating agencies to be strengthened.

Key terms of the Act
  • Credit rating: an opinion regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, or of an issuer of such debt or financial obligation, debt security, preferred share or other financial instrument, issued using an established and defined ranking system of rating categories;
  • Credit rating agency: a legal person whose occupation includes the issuing of credit ratings on a professional basis;
  • Rating category: a rating symbol, such as a letter or numerical symbol which might be accompanied by appending identifying characters, used in a credit rating to provide a relative measure of risk to distinguish the different risk characteristics of the types of rated entities, issuers and financial instruments or other assets.


ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal
Regulation No 1060/2009



OJ L 302 of 17.11.2009

Amending act(s)Entry into forceDeadline for transposition in the Member StatesOfficial Journal
Regulation No 513/2011



OJ L 145 of 31.5.2011

Directive 2011/61/EU



OJ L 17 of 1.7.2011

Last updated: 02.09.2011

See also

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