The questionnaire follows the structure of the provisions in the IOSCO Code and focuses on the aspects where more practical difficulties could arise for CRAs when applying their own codes (such as disclosure of unsolicited ratings, explanations to issuers of the rationale behind rating decisions or disclosure of changes in methodologies). When responding, market participants are encouraged to identify the credit rating agency or agencies to which the answer refers.
On 17 May 2006, CESR received a letter from the European Commission formally requesting CESR to report on credit rating agencies’ compliance with the IOSCO Code by the end of this year. This letter and CESR’s response have also been published today on CESR website (Ref. CESR/06-220).
The request from the European Commission fits well into the work CESR is carrying out under the voluntary framework, already described in CESR’s proposal (Ref. CESR/ 05-139b). CESR therefore intends to publish the abovementioned report by the end of October and anticipates that this report will have two separate sections. The first section of the report will identify for each CRA adhering to CESR’s voluntary framework whether there are any provisions of the IOSCO code that they have chosen to explain rather than comply with. This will be based on the letters of disclosure submitted to CESR by the rating agencies on their compliance with the IOSCO code. These letters are also published today on CESR’s website in the section Credit Rating Agencies (Ref. CESR/06-220).
The second part of the report will provide indications of the level of day-to-day application of the codes in practice. To this effect, CESR representatives met with the CRAs on 19 June to discuss their submissions and to consider a number of issues concerning how they are applying their codes in practice. This forms the subsequent step identified in the voluntary framework proposed by CESR (Ref. CESR/05-139b). In addition, the input from market participants received through the questionnaire published today will contribute to this second part of the report and will form an essential element in allowing CESR to survey the day-to-day application of the CRAs codes in practice and to identify if there is any evidence of particular issues which are proving difficult.
Questionnaire on the day-to-day application of the IOSCO code by the Credit Rating Agencies
