McCreevy vows to regulate credit rating agencies

McCreevy to push rating agency regulation, shunning the advice of CESR, ESME and Iosco’s code of conduct

BRUSSELS – Charlie McCreevy believes a regulatory solution is necessary for the reform of credit rating agencies (CRAs). The European commissioner for the internal market, speaking last week at the Centre for European Policy Studies, said he is not persuaded by voluntary self-regulation and will instead seek “external oversight” for CRAs.

McCreevy said he remains unconvinced by the conclusions of the Committee of European Securities Regulators (CESR) and the European Securities Expert Market Group (ESME), or the reforms of the CRAs themselves. “I want to thank both CESR and ESME for their valuable work even if I do not agree with all of their conclusions,” said the commissioner.

“While some of the additional steps that the main rating agencies have announced are welcome, they are insufficient,” said McCreevy. “This is one of many reasons why I have concluded that a regulatory solution at European level is now necessary to deal with some of the core issues.”

The International Organisation of Securities Commissions (Iosco) – previously dubbed a “toothless wonder” by McCreevy – has sought reform to the industry code to offset demands for regulation. “I am not persuaded that the appropriate response lies in strengthening the voluntary framework established by the Iosco code,” said McCreevy.

“I intend to propose in October a registration and external oversight regime for rating agencies, whereby European regulators will supervise the policies and procedures followed by the CRAs. Reforms to the corporate and internal governance of rating agencies will form a part as well,” he said.

The commissioner said the current crisis has been “a reality check” for the financial system and that supervisors must be up to the job, as he prepares to take the initiative in October.

“I also want to make it clear that I see no point in regulating to give supervisors more powers if they are not financed and equipped to recruit and develop more expertise – especially in the field of structured finance.”