EU Revises Rules on Rating Agencies

July 19, 2010 by · Leave a Comment
Filed under: General, The Rating Agencies 

The European Commission has suggested a list of revisions to EU rules on credit rating agencies that would increase transparency and centralize European supervision. Should the proposals be enacted, the European Securities and Markets Authority (ESMA) would take over the supervision of rating agencies in Europe from national authorities. The ESMA is a new entity whose legislation is still being negotiated by member states and the European Parliament.

Commission President Jose Manuel Barroso has stated that a European credit rating agency is another possibility. “We are looking at the idea,” he said. “Is it normal to have only three relevant actors on such a sensitive issue where there is a great possibility of conflict of interest? Is it normal that all of them come from the same country?”

Any proposals along these lines are not expected before September.

Bad idea. Leave credit evaluation to the market participants. Eliminate NRSRO designations. Ban governmental endorsements of rating agencies. Delete the use and reference to ratings.

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