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Credit Rating Agencies in the Line of Fire?

Credit Rating Agencies in the Line of Fire?

by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman of the European Association of Corporate Treasurers

ESMA has issued a ‘Call for Evidence’ to help find ways of increasing competition, broadening choice and minimising conflicts of interests in the credit rating agencies industry. What will the upshot be? Are the suggested solutions really practicable and conceivable? Is it really possible to use restrictive measures to reduce systemic risk and avert the next financial crisis? Some people are quite sure of that, to the potential detriment of ‘real economy’ companies with credit ratings.

Improving the workings of the credit rating agencies industry

ESMA (the European Securities and Market Authority) has initiated a consultation process to gather information from market participants about the workings of credit rating agencies and the structured financial instruments market (as required by law – Regulation [EC] 1060/2009 on credit rating agencies [CRAs]). ESMA wants to gain a better understanding of the competition aspect, the choice aspect and potential conflicts of interests that might arise in the credit rating agencies industry generally, together with the impact of a number of specific measures under consideration for regulating credit rating agencies (CRA). The deadline for responding to this call was 31/03/2015. Once they have been gathered in, these responses should enable ESMA, the European markets supervisor, to issue a recommendation on the subject to the European Commission (art. 39 [4] and 39 [5] of the CRA Regulation).