Coreper and EP approve regulation on credit rating agencies

Prague, April 23rd, 2009

The Regulation on credit rating agencies – a key topic on the agenda of the Czech Presidency – was approved today by the Committee of Permanent Representatives (COREPER) and by the European Parliament. The final approval of the compromise text of the regulation, drafted by the Czech Presidency, is a significant step toward enhancing the transparency of financial markets.

The adoption of the Regulation on credit rating agencies is a clear signal for EU investors and global partners. It includes particularly the requirements for registration of credit rating agencies in the EU, rules for issuing ratings, prevention of conflicts of interest and for increased transparency of the activities of credit rating agencies. For instance, they will continue to publish information on the results of their past ratings, which will allow the users (financial institutions and investors) to assess their quality.

The supervision of the activities of credit rating agencies within the EU represents a dramatic change in the system. Collective control authorities comprised of national control authorities of individual Member States will be established. This system should improve the coordination and exchange of information during supervision of the credit rating agencies in the whole of the EU.

The regulation further introduces new responsibilities for financial institutions. New rules are introduced for credit rating agencies from countries outside the EU that issue ratings used by EU financial institutions. Large rating agencies with a registered office outside the EU will have to open a branch within the EU. This office will be responsible for the quality of the agency’s ratings used in Europe (endorsement mechanism). Small credit rating agencies from countries with no adequate regulation of credit ratings will have the chance to ask for an exception from this obligation (equivalence and certification mechanism).

Compared to the standard pace of the European institutions, the approval process of the Regulation on credit rating agencies has been unusually fast. The European Commission did not publish the draft until November 2008. The main negotiations with the Member States were organised by the Czech Presidency which prepared a compromise draft approved by the Permanent Representatives Committee (Coreper) at the beginning of March. Within the intensive negotiations with the European Parliament, the Czech Presidency managed to effectively set up a joint compromise position that has now been formally approved by both Coreper and the European Parliament.

Radka Kohutová,
Spokeswoman of the Ministry of Finance