| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2014) 248 final (05.05.14) |
| Publication Date | 05/05/2014 |
| Content Type | Policy-making, Report |
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Credit Rating Agencies (CRAs) play an important role in today’s capital markets in terms of access to capital and long term financing of the world’s economy. Since a credit rating reflects the rating agency’s opinion, as of a specific date, of the creditworthiness of a particular state, company, security, or obligation, it represents an important input to investors and other market participants influencing their strategic decision-making. The role CRAs played in the recent financial crisis illustrates their importance for the globalised financial markets, with credit ratings affecting securities markets in many ways, including an issuer’s access to capital, the structure of transactions and the ability of fiduciaries and others to make particular investments. This is even more important for long term investments, where CRAs have an impact on the way savings are channelled to long-term investment needs. A number of distinctly smaller CRAs have emerged in Europe (their number has further increased after the introduction of European legislation on CRAs in 2009), operating with a clear focus on specific industry sectors (e.g. the insurance industry), financial market segments (e.g. municipal bonds) or specific geographical area, thus responding to specialised market needs. The established regulatory framework of the Regulation on credit rating agencies in the EU requires them to be registered, authorised and supervised by the European Securities and Markets Authority (ESMA). The legislation also subjects them to stringent independence rules as a pre-condition for the provision of rating services. Compliance with this regulatory regime has played a role of quality assurance for their services on the market and has, in this way, helped them to evolve over time as serious market actors. Nevertheless, despite their good potential to grow, to date these new market players often remain small in terms of scope and geographical orientation. |
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| Source Link | http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2014:248:FIN |
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| Subject Categories | Business and Industry |
| Countries / Regions | Europe |
