BRUSSELS – Following a mandate from the European Commission (EC) in November 2007, the European Securities Markets Expert Group (ESME) has published its response to the EC on the role of credit rating agencies (CRAs).
The first part of ESME's report responds to the EC’s general questions on the role of CRAs in the financial market and the current regulation of CRAs. The second part addresses the precise questions set out in the EC’s mandate such as ESME's views on the quality of ratings and whether they are sufficiently transparent. The final section defines a number of key issues around CRAs and provides the EC with a set of recommendations designed to mitigate or eliminate current deficiencies.
The recommendation focus on the problems inherent in the rating of structured products, which will be discussed in more detail in the next issue of OpRisk & Compliance.