CESR published on December 2005 a voluntary framework to oversee compliance with the IOSCO Code (CESR 05-751). In summary, this framework includes three elements: (i) an annual letter from each Credit Rating Agency (CRA) to be sent to CESR, and made public, outlining how it had complied with the IOSCO Code and indicating any deviations from the Code; (ii) an annual meeting between CESR and the CRAs to discuss any issues related to implementation of the IOSCO Code; and (iii) CRAs would provide an explanation to the national CESR member where any substantial incident occur with a particular issuer in its market.
Moody’s, Standard and Poors’, Fitch Ratings and DBRS Limited are the CRAs that have currently chosen to adhere to the voluntary framework.
Subsequently, the European Commission published a Communication on 9 January 2006, where it expressed its intention to request CESR to report, on an annual basis, on the assessment of CRAs compliance of the IOSCO Code of conduct. Following the Commission’s first request in June 2006, CESR provided in December its first report (CESR 06-545) including an analysis of the codes of the four CRAs that have chosen to adhere to the voluntary framework in relation to the IOSCO Code.
On 7 May 2007, CESR received a letter from the European Commission (attached) acknowledging the usefulness of CESR’s 2006 report on CRAs’ compliance with the IOSCO Code and formally requesting CESR prepare a second report by the end of this year.
This document sets out the annual letters of disclosure received by CESR from the CRAs for the 2007 report on their compliance with the IOSCO Code.
Next steps:
As CESR anticipated in its 2006 report, for Moody’s, Standard and Poors’, Fitch Ratings and DBRS Limited, this year CESR will look particularly into the areas of non compliance that were pointed out last year and will analyse any modifications in the provisions of the CRAs codes that have been introduced since then and the reasons for the change. Also, CESR intends to look into the forthcoming SEC implementing rules on the new US legislation on the rating business. In addition, CESR will monitor the IOSCO on going work to clarify some of the provisions of the IOSCO Code that were identified as generating confusion among regulators and CRAs.
As set out in the statement published in December 2005, CESR would welcome any other CRAs which would fall within the scope of the IOSCO Code and operating in the EU markets that wish to adhere to this voluntary framework, to indicate their interest to the CESR secretariat as soon as possible. For further information, please contact Raquel Garcia Alcubilla via email at rgarcia@cesr.eu or by phone +34 91 585 16 01.
The letters sent and received from the Credit Rating Agencies can be accessed through CESR’s website in the section Expert Groups/Credit Rating Agencies.