Regulating Credit Ratings Agencies: “Still Room For Improvement”, Say EU Auditors

The EU watchdog set up to monitor credit ratings agencies in the wake of the 2008 financial crisis has established good foundations, but significant risks remain to be addressed, according to a new report from the European Court of Auditors.

The European Securities and Markets Authority (ESMA) was set up in 2011 to register, monitor and supervise credit ratings agencies. At the time, they were more or less unregulated in Europe, and attention was focused on their impact on financial markets. ESMA now supervises 23 credit rating agencies registered in the EU. But its rules and guidelines are not yet complete, say the auditors.

They acknowledge that ESMA has managed to reduce the average duration of the registration process, but say the process remains complex. Although credit rating methodologies should be rigorous, systematic, continuous, and subject to validation, ESMA’s methods focus mainly on rigour.

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