PRESS RELEASE Today the European Commission has unveiled its long-awaited proposal on Credit Rating Agencies (CRAs). This proposal is the third round of legislation on CRAs since 2008 and has to be seen within the current context of the sovereign debt crisis. Whereas an objective of the proposal is to increase competition in the rating market, this proposal does not take into account the variety of business models of the currently 15 registered CRAs (with some registrations still pending and several players assessing the opportunity/benefit of registering) and focuses primarily on the global aspect of ratings. European CRAs have a special focus on European corporates and cover a wide range of SME – for these companies, the rating is first a local issue, then an European topic and sometimes a global one. Is it still worth registering under this regulation? The general approach where… (1) registered CRAs are subject to increased oversight, extensive administrative burdens, limitations on business activities and serious civil liability and (2) at the same time, discouraging the use of ratings by regulators, supervisory authorities and financial investors, makes the rating business only affordable to existing very large players.. In addition, several players providing comparable services to ratings are not registered at all. Registered CRAs are not only competing between each other but also with this wide range of unregulated players. We therefore call on a more balanced approach in the regulation in order to allow a gradual market entry with increased oversight and requirements for systemic agencies. Unfortunately, this proposal does not tackle all topics relating to CRAs as some are postponed to a later stage via reports and further proposals. This unstable legislative framework strongly inhibits further investments by CRAs into new activities and sectors required in order to change the market structure in the medium-term.
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