A proposal for the Amendment of the Credit Rating Agencies Regulation

Source: Katarina Krempova¸ PKF Malta¸ 10 January 2012


This proposal is a revision of Regulation (EC) No 1060/2009 on credit rating agencies (CRA Regulation) which requires credit rating agencies (CRAs) to comply with rigorous rules of conduct and includes two main objectives:

  • mitigating possible conflicts of interest;
  • ensuring high quality and sufficient transparency of ratings and the rating process.

Although this Regulation is providing a good basis¸ there are still some problems to tackle¸ such as:

  • the risk of overreliance on credit ratings by financial market participants¸
  • the high degree of concentration in the rating market¸
  • civil liability of credit rating agencies vis-à-vis investors¸
  • conflicts of interests with regard to the issuer-pays model and CRAs’ shareholder structure.


To improve the transparency¸ as well as the quality of sovereign ratings and the existing legal framework¸ the proposal focuses on following amendments:

1.      Extension of the scope of application of the Regulation to cover rating outlooks with an aim to extend the scope of the rules on credit ratings and publish “rating outlooks”.

2.      Amendments in relation to the use of credit ratings that require certain financial institutions to make their own credit risk assessment not to rely only on external credit ratings for assessing the creditworthiness of assets.

3.      Amendments in relation to the independence of CRAs that establish stricter independence rules¸ in particular:

  • to prevent any member or shareholder of a CRA that holds a participation of at least 5% to hold 5% or more in any other CRA¸ unless the CRAs in question are members of the same group;
  • to significantly mitigate the potential conflicts of interest issues relating to the issuer-pays model – “rotation rule” for the CRAs engaged by the issuer.

4.      Amendments in relation to the disclosure of information on methodologies of CRAs¸ credit ratings and rating outlooks with an aim to strengthen the rules on the disclosure of rating methodologies and improve rating quality.

5.      Amendments in relation to sovereign ratings that establish stricter rules to improve the quality of such ratings¸ including:

  • requirements on CRAs to assess sovereign ratings more frequently;
  • requirements on CRAs to publish a full research report when issuing and amending sovereign ratings;
  • strengthening of the rules on the publication of a transparency report by CRAs.

6.      Amendments in relation to the comparability of credit ratings and fees for credit ratings with the objective to enhance competition in the credit rating market¸ as well as to improve ratings quality. This should happen through:

  • requirements on CRAs to communicate their ratings to ESMA;
  • empowerment of ESMA to develop draft technical standards on a harmonised rating scale to be used by CRAs.

7.      Amendments in relation to the civil liability of credit rating agencies vis-à-vis investors which are aimed at reducing the risk of excessive reliance on external credit ratings.

8.      Other amendments