Cesr speaks out on rating agency regulation

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PARIS – The Committee of European Banking Regulators (Cesr) has released a critical reply to the European Commission’s draft proposal for the regulation of credit rating agencies.

The paper maintains Cesr’s May 2008 report to the European Commission is still the best solution for the challenges facing the ratings industry. That paper was released in response to the issue of a code of conduct by industry body the International Organisation of Securities Commissions, and was broadly in support of industry self-regulation.

The European Commission’s proposed regulation comes after internal market commissioner Charlie McCreevy said rating agencies required formal regulation, having previously described Iosco dismissively as a “toothless wonder”.

Cesr also criticises the limited scope of the regulation, highlighting that investors might be exposed to ratings produced by unregistered rating agencies and that provisions could be made whereby only securities backed by registered ratings could be sold within the European Union.

Cesr instead recommends the regulation be in the form of high-level principles, to be further detailed in Level 2 implementing measures, inferring that the current proposal is already too prescriptive.

A copy of Cesr’s response can be downloaded from the following link.


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