EU watchdog targets credit ratings compiled outside bloc

EPA/OLIVIER HOSLET

Steven Maijoor, Chairman of the European Securities and Markets Authority during a hearing by European parliament committee on Monetary affairs in Brussels, Belgium, 26 September 2016.

EU watchdog targets credit ratings compiled outside bloc


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Credit rating agencies Moody’s, Standard & Poor’s and Fitch, which are hosted in Britain, may find it harder to offer their services in the European Union after Brexit. The EU’s securities watchdog has proposed tougher conditions on the use of ratings compiled outside the bloc.

As reported by the Reuters news agency, under EU rules, ratings compiled in a “third country” can be used by European customers only if they are endorsed by an EU-regulated rating agency.

A rating compiled by Moody’s in New York, for example, can be used in the EU after endorsement by one of agency’s bloc-based entities.

The European Securities and Markets Authority (ESMA) authorises and supervises rating agencies in the EU. On April 4 it published a consultation paper to tighten up guidance on the use of ratings from outside the EU.

ESMA Chairman Steven Maijoor said a substantial proportion of credit ratings used in the EU were being introduced through the endorsement route.

“The need to update the current guidelines provides ESMA with the opportunity to reassess its approach to endorsement more broadly, based on our supervisory experience, and taking into account the extensive use of the endorsement regime in practice,” Maijoor said in a statement.

Moody’s said it would be reviewing the ESMA paper in detail. S&P and Fitch had no immediate comment, according to Reuters.

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