Regulation on credit rating agencies

The Commission has prepared breakthrough changes in this area. The scope of control and monitoring of rating agencies proposed in the draft Regulation goes far beyond similar regulations in other industries and areas. The proposal is based on the Code of Conduct Fundamentals for Credit Rating Agencies, which is an international voluntary code of conduct that rating agencies are expected to follow. One of the essential requirements is transparency and independence, including the guarantee that ratings are independent from business incentives. A special system of internal audits is required. The fees of top managers are expected to be independent from the profit of the agencies. The proposal relies on rating agencies’ duty to disclose applied rating procedures, models and assumptions, including amounts and ratios of all previous failed ratings. Ratings should not be carried out unless sufficient high-quality information is available. Should the proposal be adopted, another novelty will be the mandatory registration of rating agencies in EU Member States and the publication of the registrations in the Official Bulletin.