Feri’s Suggestions on CRAs‘ Regulation

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Von Dr. Oliver Everling | 14.September 2008

„We appreciate the proposal of a European Directive / Regulation on rating agencies in general“, writes Bad Homburg-based Feri EuroRating Services AG in its comment to the European Commission. The consultation paper suggests the adoption of a set of rules introducing a number of substantive requirements that CRAs will need to respect for the authorisation and exercise of their rating activity in the EU. The main objective of the Commission proposal is to ensure that ratings are reliable and accurate pieces of information for investors. CRAs will be obliged to deal with conflicts of interest, have sound rating methodologies and increase the transparency of their rating activities.

On 31 July 2008, the European Commission had published two consultation documents on CRAs seeking views from all interested parties. The first document relates to the conditions for the authorisation, operation and supervision of credit rating agencies. The second proposes policy options in order to tackle what is felt to be an excessive reliance on ratings in EU legislation.

„Regulation must be neutral towards business models“, challenges Feri EuroRating Services the proposals of the Commission. „Rating services will be provided with efficiency only if profit orientation provides for incentives to cut costs and increase earnings“, says Dr. Helmut Knepel, board member of the rating agency based in Germany. „Competition among rating agencies is only assured if market niches are protected against a bias in favor of authorized rating agencies in the mainstream rating markets.“ According to their view, European regulation is a necessity, if European rating agencies shall have a chance to compete on a level playing field with their US peers.

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