EU Reaches Preliminary Deal on Credit Rating Agencies

European Union (EU) governments and the European Parliament agreed to a preliminary deal on Wednesday to tighten supervision of credit rating agencies.

The draft deal will introduce a registration procedure for credit rating agencies to enable European supervisors to control the activities of rating agencies.

Credit rating agencies, such as Standard & Poor's, Moody's Investors Service and Fitch Ratings, will have to comply with rigorous rules to make sure that their ratings are not affected by conflicts of interest and they act in a transparent manner.

The Committee of European Securities Regulators (CESR), a group of national securities regulators from the EU's 27 member states, would be in charge of registration for the first year.

Each credit rating agency will be closely monitored by a college of supervisors from each country where it operates.

The European Commission will be tasked to come up with a legislative proposal by July 2010 for creating a European regulator to monitor ratings in the longer term.

Credit rating agencies were blamed for the financial crisis because they failed to give adequate warning to investors of risks related to the U.S. subprime mortgage market.

The preliminary deal needs formal approval by EU governments and the European Parliament, with the latter expected to do so next week.

Source: CRIEnglish