Regulations on Credit Rating Agencies (CRA)
In October 2009, the European Parliament approved the Regulation of the European Parliament and of the European Council concerning credit rating agencies (hereinafter referred to as "the Regulation").
Credit rating agencies play an important role in global securities and banking markets, as investors, borrowers, issuers and governments make use of their credit ratings as part of the process of making informed investment and financing decisions.
Most credit rating agencies are currently based outside of the Community. Most Member States do not regulate the activities of credit rating agencies or the conditions for the issue of credit ratings. Despite their significant function in the operation of the financial markets, credit rating agencies are only subject to Community legislation in limited areas, notably Directive 2003/6/EC of the European Parliament and of the European Council dated 28 January 2003 on insider dealing and market manipulation. In addition, Directive 2006/48/EC of the European Parliament and of the European Council dated 14 June 2006 relating to the taking up and pursuit of the business of credit institutions and Directive 2006/49/EC of the European Parliament and of the European Council dated 14 June 2006 on the sufficiency of capital of investment firms and credit institutions pertain to credit rating agencies. It is important, therefore, to determine rules ensuring that all credit ratings issued by the credit rating agencies registered within the Community are of due quality and issued by credit rating agencies subject to stringent requirements. The Commission will continue to work with its international partners to secure convergence of the rules applying to credit rating agencies.
This Regulation should apply to credit ratings issued by those credit rating agencies registered within the Community. The principal aim of this Regulation is to protect the stability of financial markets and investors.
Credit rating agencies should, on a voluntary basis, apply the Code of Conduct Fundamentals for credit rating agencies issued by the International Organisation of Securities Commissions, hereinafter referred to as the "IOSCO Code". In 2006 a communication from the Commission on Credit Rating Agencies invited the Committee of European Securities Regulators (CESR), established by Decision of the European Commission 2009/77/EC, to monitor compliance with the IOSCO Code and report back to the Commission on an annual basis.
It is desirable to make provision for the use of credit ratings issued in third countries for regulatory purposes in the Community, provided that they comply with requirements which are as stringent as the requirements contained in this Regulation. This Regulation introduces an endorsement regime which permits credit rating agencies which are established in the Community and registered in accordance with this Regulation to endorse credit ratings issued in third countries. When endorsing a credit rating issued in a third country, credit rating agencies should determine and monitor on an interim basis whether those credit rating activities which result in the issue of such a credit rating comply with requirements for issue of credit ratings which are as stringent as those contained in this Regulation, achieving the same regulatory objectives and effects in practice.
This Regulation should not replace the established process of recognising External Credit Assessment Institutions (ECAIs) in accordance with Directive 2006/48/EC. Those ECAIs already recognised within the Community should apply for registration in accordance with this Regulation.
Supervision of a credit rating agency should be performed by the competent authority of the home Member State in conjunction with the competent authorities of the other Member States concerned, making use of the college and keeping the CESR appropriately involved.
The Regulation requires the Member States to appoint a competent authority tasked with the responsibility of supervising and regulating rating agencies. A decision has been adopted that the regulatory authority for the above purposes will be Národná banka Slovenska.
The measures required for implementation of this Regulation should be adopted within six months of the date of the Regulation entering into effect, i.e. in March 2010. In addition, over the three months period prior to the date marking six months after the Regulation entered into force, i.e. in approximately March to May 2010, the existing agencies will be required to submit their applications for registration. Pursuant to the Regulation, these applications are to be concentrated, meaning that the Slovak Republic will register local agencies and, at the same time, take part in the process of registering foreign rating agencies that indicate their interest in using their credit assessments within the territory of the Slovak Republic; the process will be performed by the colleges to be established for that purpose.