OPINION OF THE EUROPEAN CENTRAL BANK on a proposal for a
regulation of the European Parliament and of the Council on credit rating
agencies.
On 17 December
2008 the European Central Bank (ECB) received a request from the Council of
the European Union for an opinion on a proposal for a regulation of the
European Parliament and of the Council on credit rating agencies.
The ECB
welcomes the objectives of the proposed regulation and supports the agreement
recently reached at the G20 meeting as part of the internationally
coordinated initiatives to strengthen the regulatory framework for credit
rating agencies. The ECB is of the view that:
- the level of
transparency for the issuance of ratings and their ongoing
monitoring should be improved to allow better comparison of credit
rating agencies’ rating assessments;
- the rating
process should fulfil adequate standards ofquality and
integrity (in particular, the rating process should not to lead to
excessive volatility of ratings);
- the
integrity and independence of credit rating agencies should be
safeguarded by ensuring that conflicts of interest are either avoided or
are properly addressed.
Moreover, the
ECB supports the wide scope of the proposed regulation but makes a
number of observations:
- the
expression ‘for use for regulatory purposes or otherwise’ indicates a
preference for a wide scope, but both the explanatory memorandum
accompanying the proposed regulation and the Commission’s impact
assessment advocate a narrower approach;
- ‘regulatory
purposes’ is not specifically defined and it is not specified whether it
covers references to recourse to ratings in Community legislation and in
national laws;
- it is
suggested clarifying that credit ratings are considered as publicly
disclosed if they enable access at equivalent terms to potential users
and allow for proper assessment by the public;
- credit
ratings should be based on methodologies combining qualitative and
quantitative approaches.
The ECB also
makes a number of specific observations concerning:
- the impact
of the proposed regulation on central bank operations;
- exemptions
for national central banks’ (NCBs’) in-house credit assessment systems;
- cooperation
between competent authorities and the exchange of information;
- waivers for
local credit rating agencies;
- the establishment
by the Committee of European Securities Regulators (CESR) of a central
repository;
- additional
legal and technical comments.