Brussels, 10 January 2007
The European Commission has welcomed a report issued by the Committee of European Securities Regulators (CESR) on the extent to which credit rating agencies (CRAs) comply with the International Organisation of Securities Commissions (IOSCO) Code. The report concludes that the main CRAs generally comply with the Code, but also identifies various deviations. CESR was asked to monitor CRAs' compliance as part of the Commission's new policy approach to CRAs, which is based on a combination of existing EU financial services Directives and industry self-regulation (see IP/06/8).
Internal Market and Services Commissioner Charlie McCreevy said: "Last year, we told CRAs that they remain "on watch" and will be monitored actively. In this respect, I welcome CESR's report which provides a useful indication for the level of CRAs' compliance with the IOSCO Code. The report confirms that the self-regulation by CRAs functions reasonably well. The Commission will continue to monitor developments in this area, and, in particular, the impact of the new US Act on CRAs which will be operational by next summer."
The Commission concluded in its Communication that no new legislative initiatives were needed since the existing securities Directives (i.e. the Market Abuse Directive, the Capital Requirements Directive and the Markets in Financial Instruments Directive) cover adequately the most important aspects related to their activity. In combination with self-regulation on the basis of the IOSCO's Code of Conduct Fundamentals for credit rating agencies, the Commission is confident that the right regulatory balance had been struck. Part of this approach is to actively monitor developments in this area, and, therefore, the Commission asked CESR to monitor compliance with the IOSCO Code and report back to it on an annual basis.
CESR's report concludes that the main CRAs generally comply with the IOSCO Code and notes that, consequently, CRAs' activities are more transparent. However, the report also identifies various deviations from the IOSCO Code and recommends the improvement of certain provisions of the IOSCO Code. Considering the report's main conclusions, the Commission believes that CRAs will need to continue their efforts to comply with all the Code's provisions, and the Commission will be pushing for improvements in these areas of CRAs' activities, where shortcomings have been identified. However, the case for new legislation in this area remains unproven. Nevertheless, the Commission will continue to monitor developments in this area and, in particular, the impact of the new US Act on CRAs which will be operational by next summer.
The Commission's Communication and CESR's report are available at: