Esma sounds alarm over conflicts at CLO raters

Investigation points to analysts meeting with managers and notes softening of rating methodologies


Credit ratings on collateralised loan obligations (CLOs) are vulnerable to conflicts of interest that could lead rating agencies to loosen their rating methodologies, according to a new report from the European Securities and Markets Authority (Esma). 

Rating agency staff often interact with CLO arrangers, managers and investors as part of their usual course of business. Rating analysts sometimes join these discussions.

However, Esma says these conversations sometimes stray into discussions that

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