CESR task force presents plan for rating agencies review

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BRUSSELS – The Committee of European Securities Regulators (CESR) has released the timetable for its review into the role of credit rating agencies and the future of their self-regulation, at the request of the European Commission.

The Commission requested CESR look specifically at certain areas during its investigation. These include human resources allocation for rating and monitoring, regular monitoring and prompt rating, the transparency of rating methodologies, and potentially crucial conflicts of interest in the remuneration structures of the agencies.

In preparation of its January 2008 consultation paper, CESR is co-operating with the US Securities and Exchanges Commission (SEC) over the role of rating agencies in the rating of structured products, and with the Committee of European Banking Supervisors (CEBS) over their role within the Basel II framework.

The investigation also involves co-operation with the European Securities Markets Experts Group (ESME), the International Organization of Securities Commissions (IOSCO), and the Committee on the Global Financial System (CGFS), drawing together conclusions to advise the Commission on whether self-regulation or formalised EU regulation is necessary.

The task force has held four separate hearings with the rating agencies to gather information on their codes of conduct, views on the Commission’s request in relation to their handling of the subprime crisis, and how they intend to address shortcomings within their role in the market. Hearings will be held with other market participants when the paper has been drawn.

The final report is due in May 2008.