Report from the Commission to the European Parliament and the Council on alternative tools to external credit ratings, the state of the credit rating market, competition and governance in the credit rating industry, the state of the structured finance instruments rating market and on the feasibility of a European Credit Rating Agency

This report responds to several reporting obligations set out in Regulation (EC) No 1060/2009 on Credit Ratings Agencies (CRA Regulation). In particular, this report:
- analyses references to external credit ratings in EU legislation and in private contracts among parties in financial markets. It also assesses potential alternatives to external credit ratings that are currently being used by market participants across the EU;
- assesses the impact and effectiveness of the CRA Regulation's measures concerning competition in the credit rating industry;
- evaluates the impact of the CRA Regulation on governance and internal procedures of CRAs, in particular the prevention of conflict of interests and the use of alternative remuneration models. The report also analyses the provisions relating to Structured Finance Instruments (SFIs) and their potential extension to other asset classes;
- considers the feasibility of the establishment of a European CRA for the assessment of sovereign debt and a European credit rating foundation for all other credit ratings.

The report assesses inter alia many of the key provisions introduced in the last amendment of the CRA Regulation. It draws from the Technical Advice of the European Securities and Markets Authority (ESMA) on reducing sole and mechanistic reliance on external credit ratings, the study conducted by ICF Consulting Services on the feasibility of alternatives to credit ratings, the ESMA Technical Advice on competition, choice and conflict of interest in the credit rating industry and the study conducted by Europe Economics on the state of the credit rating market. Stakeholders were extensively consulted through workshops, questionnaires and interviews in the course of the preparation of these technical advice and studies.

ESO: Background information: The case for a European public credit rating agency http://www.europeansources.info/record/the-case-for-a-european-public-credit-rating-agency/

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