2010/2302(INI)
Credit rating agencies: future perspectives
| ECON | JURI | |
| Lead Rapporteur | KLINZ Wolf (ALDE) | |
| Opinion Rapporteur(s) | REGNER Evelyn (S&D) |
Legal basis: RoP 048
Procedure completed
| Role | Committee | Rapporteur | Shadows |
|---|---|---|---|
| Lead | ECON | KLINZ Wolf (ALDE) | |
| Opinion | JURI | REGNER Evelyn (S&D) |
Legal Basis RoP 048
Activites
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2011/06/08
Text adopted by Parliament, single reading
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T7-0258/2011
summary
The European Parliament adopted a resolution on credit rating agencies (CRAs): future perspectives. The resolution recalls that CRAs are supposed to be information intermediaries, reducing information asymmetries in the capital markets and facilitating global market access. In recent legislation, CRAs have been assigned another role which can be classified as one of 'certification', reflecting the fact that ratings are increasingly embedded in regulatory capital requirements. CRAs played a significant role in the build-up to the financial crisis through the assignment of faulty ratings to structured finance instruments. The credit rating industry has various problems, amongst which the most important are the lack of competition, oligolistic structures and the lack of accountability and transparency. A problem of the dominant rating agencies in particular is the payment model and whereas the regulatory system's key problem is over-reliance on external credit ratings. Firstly, the report assesses the macroeconomic role of CRA in the global financial market regulation and then looking at the intermediate level and questions of competition and the industry structure. Lastly, the report assesses conflicts of interest in the business model, i.e. the micro level. (1) Macro level: financial market regulation Over-reliance: Parliament considers that the over-reliance of the global financial regulatory system on external credit ratings has to be reduced as far as possible and in a realistic timeframe. It considers it important to establish a capital adequacy framework that ensures robust internal risk assessment, better oversight of such risk assessment, and improved access to credit-relevant information. Members support in this respect the increased use of the internal-ratings-based (IRB) approach provided that it is reliable and safe and that the size, capacity and sophistication of the financial institution allow for an adequate risk assessment. Parliament expresses the view that market participants should not invest in structured or other products if they cannot assess the underlying credit risk themselves, or alternatively that they should apply the highest risk weighting. Increased capacity for supervisors: Members are aware of the inherent conflict of interest if market participants devise internal credit risk assessments for their own regulatory capital requirements. Hence, they see the need to increase supervisors' responsibilities, capacity, powers and resources for monitoring, assessing and overseeing the adequacy of the internal models and for imposing prudential measures. They consider that if an internal model cannot be appropriately assessed by the supervisor due to its complexity such a model shall not be approved for regulatory use. (2) Intermediate level: industry structure European Credit Rating Foundation: the Commission is asked to conduct a detailed impact assessment and viability study on the costs, benefits and potential governance structure of a fully independent European Credit Rating Foundation (ECRaF) which would expand its expertise into all three sectors of ratings. The Commission should consider the start-up financing costs to cover the first three to maximum five years of the Foundation's work. Members are strongly of the opinion that financing costs should under no circumstances be borne by taxpayers and considers that no further funding should be provided and that the new ECRaF should be fully self-sufficient financing its own budget after the start-up period. Members consider that, to ensure its credibility, the management, staff and governance structure of the new Foundation need to be fully independent and autonomous. i.e. not bound by instructions vis-à-vis the Member States, the Commission and all other public bodies as well as the finance industry and other CRAs. Disclosure and access to information: Parliament points out that, in order to enable investors to adequately assess risk and to fulfil their due diligence and fiduciary duties, increased disclosure of information on products is necessary in the field of structured finance instruments to allow investors to make informed judgments. Sophisticated investors should be able to assess the underlying credits from which they can then derive the risk of a securitised product. The resolution calls on the Commission to assess the need to increase disclosure of information for all products in the field of financial instruments. It also calls on the Commission to propose a revision of Directive 2003/71/EC and Directive 2004/109/EC in order to ensure that sufficient accurate and complete information on structured finance instruments is more widely available. Members call for, alongside increased transparency of the rating process and its internal auditing, stronger supervision of CRAs by EU supervisory authorities and of more intrusive supervision by national supervisory authorities of the use/dependency on ratings by financial institutions. Two obligatory ratings: Members consider that the Commission should consider whether, under certain circumstances, the use of two obligatory ratings is appropriate e.g. for structured finance instruments and for any external credit ratings used for regulatory purposes and whether the most conservative, meaning least favourable, external credit rating should be regarded as the reference for regulatory purpose. Sovereign debt rating: Members ask the industry to clarify which methodology and judgments are used to calibrate sovereign ratings and to explain deviation from these model-generated ratings and from the forecasts of the main international financial institutions. Given the effects that credit ratings of sovereign debt can have on the market, Members support enhanced disclosure and explanation of methodologies, models and key rating assumptions adopted by credit rating agencies. (3) Micro level: business model Payment models: Parliament supports the existence of various payment models in the industry but highlights the existence of risks of conflicts of interest which need to be addressed by appropriate transparency and regulatory means while not imposing an unwarranted model. The Commission is asked, based on the recent consultation, to come forward with proposals for alternative viable payment models that involve both issuers and users. Members take the view that good governance in CRAs is crucial to ensure the quality of ratings and calls for full transparency from CRAs on the governance arrangements in place. Accountability, responsibility and liability: Members consider that CRAs should be held accountable for the consistent application of the underlying methodology of their credit ratings. They recommend therefore that CRAs' exposure to civil liability in the event of gross negligence or misconduct be defined on a consistent basis across the EU and that the Commission should identify ways for such civil liability to be anchored in Member States' civil law. The resolution suggests that each registered CRA should conduct an annual review to assess its past credit rating performance and should compile this information in an accountability report for the supervisor. It suggests that the European Securities and Markets Authority(ESMA) should carry out random checks on accountability reports on a regular basis to ensure a high quality standard in credit ratings.
- Results of vote in Parliament
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T7-0258/2011
summary
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2011/06/08
Commission response to text adopted in plenary
- SP(2011)8071
- DG Internal Market and Services, BARNIER Michel
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2011/06/06
Debate in Parliament
- 2011/03/23 Committee report tabled for plenary, single reading
- 2011/03/23 Committee report tabled for plenary, single reading
- 2011/03/16 Vote in committee, 1st reading/single reading
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2011/01/17
Deadline Amendments
- 2010/12/16 Committee referral announced in Parliament, 1st reading/single reading
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2010/12/09
EP officialisation
- 2010/11/24 Committee draft report
Documents
- Committee draft report: PE454.361
- Committee report tabled for plenary, single reading: A7-0081/2011
- Committee report tabled for plenary, single reading: A7-0081/2011
- Decision by Parliament, 1st reading/single reading: T7-0258/2011
- Results of vote in Parliament: Results of vote in Parliament
- Commission response to text adopted in plenary: SP(2011)8071
| Amendments | Dossier |
| 206 |
2010/2302(INI) Credit rating agencies: future perspectives
2011/01/20
ECON
191 amendments...
Amendment 1 #
Motion for a resolution Recital A A. whereas it welcomes the ongoing work at global
Amendment 2 #
Motion for a resolution Recital B B. whereas CRAs are information intermediaries
Amendment 3 #
Motion for a resolution Recital B B. whereas CRAs are information intermediaries, reducing information asymmetries in the capital markets
Amendment 4 #
Motion for a resolution Recital B B. whereas CRAs are supposed to be information intermediaries, reducing information asymmetries in the capital markets and facilitating global market access, reducing information costs and widening the potential pool of borrowers, thus providing liquidity to markets and helping find prices,
Amendment 5 #
Motion for a resolution Recital Β B. whereas
Amendment 6 #
Motion for a resolution Recital B B. whereas CRAs are information intermediaries, reducing information asymmetries in the capital markets and facilitating global market access, reducing information costs and widening the potential pool of borrowers and investors, thus providing liquidity and transparency to markets and helping find prices,
Amendment 7 #
Motion for a resolution Recital C C. whereas CRAs virtually fulfil sovereign duties having been, in recent legislation,
Amendment 8 #
Motion for a resolution Recital C C. whereas,
Amendment 9 #
Motion for a resolution Recital C a (new) Ca. whereas the activities of CRAs have had a considerable macroeconomic impact by altering the behaviour of financial operators,
Amendment 10 #
Motion for a resolution Recital C b (new) Cb. whereas financial operators have placed excessive reliance on the judgments made by CRAs, which have moreover had considerable influence over international banking regulators,
Amendment 11 #
Motion for a resolution Recital D D. whereas CRAs rate three different sectors, the public sector, companies and structured finance instruments, and whereas CRAs played a significant role in the build-up to the financial crisis through the assignment of
Amendment 12 #
Motion for a resolution Recital D D. whereas CRAs rate three different sectors, the public sector, companies and structured finance instruments, and whereas CRAs played a significant role in the build-up to the financial crisis through
Amendment 13 #
Motion for a resolution Recital D D. whereas, at present, CRAs rate three different sectors, the public sector, companies and structured finance instruments, and whereas CRAs played a significant role in the build-up to the financial crisis through the assignment of faulty ratings to structured finance instruments, which had to be downgraded on average three to four notches during the crisis,
Amendment 14 #
Motion for a resolution Recital D a (new) Da. whereas CRAs were instrumental in the development of the euro zone debt crisis through their repeated downgrading of national bonds and unfavourable assessments of euro zone economies, disregarding favourable EU, ECT and IMF assessments of progress by national financial reform and restructuring programmes or the major steps taken at European level to strengthen economic governance and provide a permanent framework for financial stability; whereas these unfavourable assessments had major implications for the European banking system and EU bond market,
Amendment 15 #
Motion for a resolution Recital D a (new) Da. whereas professional investors have no capacity of their own for assessing sovereign debt and structured financial products and therefore have to trust blindly in private CRAs, which de facto play a preponderant role in devising and assessing the said financial products,
Amendment 16 #
Motion for a resolution Recital E E. whereas Regulation No 1060/2009 was the first reaction to the financial crisis and already deals with the most pressing issues, subjecting CRAs to oversight and regulation; whereas, however, it does not address all the fundamental problems
Amendment 17 #
Motion for a resolution Recital E a (new) E a. Whereas the absence of regulatory certainty in this sector is putting at risk the proper functioning of EU financial markets and therefore requires the EU Commission, before coming forward with further amendments to Regulation 1060/2009, to properly identify the gaps in the new framework and provide an impact assessment on the range of alternatives available to fill such gap including the possibility of further legislative proposals.
Amendment 18 #
Motion for a resolution Recital F F. whereas the industry's key problem is lack of competition, but noting that competition can also create conflict of interest, and the regulatory system's key problem is dependency on external credit ratings,
Amendment 19 #
Motion for a resolution Recital F F. whereas the industry’s key problem
Amendment 20 #
Motion for a resolution Recital F F. whereas the industry's key problem is lack of competition, oligolistic structures as well as over-reliance on the issuer-pays model and the regulatory system's key problem is dependency on external credit ratings,
Amendment 21 #
Motion for a resolution Recital F F. whereas the
Amendment 22 #
Motion for a resolution Recital F F. whereas the industry
Amendment 23 #
Motion for a resolution Recital F F. whereas the industry’s key problem is lack of competition, accountability and transparency and the regulatory system’s key problem is dependency on external credit ratings,
Amendment 24 #
Motion for a resolution Recital F a (new) F a. whereas it is still common practice that credit rating agencies assess market participants while simultaneously obtaining orders from them which leads to competition bias,
Amendment 25 #
Motion for a resolution Recital F a (new) Fa. whereas the mode of financing of private CRAs does not make it possible to guarantee their independence from the market and inherently entails a risk of conflicts of interest which may dangerously distort the proper functioning of markets,
Amendment 26 #
Motion for a resolution Recital F a (new) F a. whereas the best way to enhance competition would be to create a regulatory environment effective at promoting entry, and undertake a deeper analysis of the current barriers to entry and other factors affecting competition,
Amendment 27 #
Motion for a resolution Recital Fa (new) Fa. whereas the key problem of the regulatory system is its overdependence on external credit ratings,
Amendment 28 #
Motion for a resolution Recital G G. whereas
Amendment 29 #
Motion for a resolution Recital H Amendment 30 #
Motion for a resolution Recital H H. whereas there seems to be a lack of qualitative comparability in some of the present three sectors of ratings,
Amendment 31 #
Motion for a resolution Recital I I. whereas the r
Amendment 32 #
Motion for a resolution Recital I I. whereas the recent developments in the euro crisis have highlighted the significant role of sovereign debt ratings, and both inconsistency and pro-cyclicality in the regulatory use of ratings,
Amendment 33 #
Motion for a resolution Recital I I. whereas the recent developments in the euro crisis have highlighted the significant role of sovereign debt ratings, where the CRAs' performance did not always convince and where the decisions of CRAs were not always fully comprehensible,
Amendment 34 #
Motion for a resolution Recital I I. whereas the recent developments in the euro crisis have highlighted the significant role of sovereign debt ratings, as well as major shortcomings concerning the rules governing the regulation and oversight of CRA activities,
Amendment 35 #
Motion for a resolution Recital I a (new) I a. Observes that independence of ratings from political manipulation is paramount in the context of economic governance and stress tests,
Amendment 36 #
Motion for a resolution Recital I a (new) I a. Whereas independence of ratings from market and political interference must be ensured whatever new structures and business models may emerge,
Amendment 37 #
Motion for a resolution Recital I b (new) I b. While ratings can and do change as a result of fundamental adjustments to risk profile or new information, they should be designed to be stable and not fluctuate on the basis of market sentiment,
Amendment 38 #
Motion for a resolution Recital I a (new) I a. whereas cases such as BP show that to fully appreciate financial risks of companies and financial institutions, environmental and social factors are key,
Amendment 39 #
Motion for a resolution Recital I a (new) Ia. whereas the Basel II system has resulted in excessive reliance on external ratings, leading in some cases to banks' deciding against performing autonomous assessments of their exposures,
Amendment 40 #
Motion for a resolution Recital I b (new) Ib. whereas recent regulation of ratings in the United States, with the Dodd Frank Act, has opted for less regulatory reliance on agencies’ judgments,
Amendment 41 #
Motion for a resolution Recital I a (new) I a. Whereas rating of sovereign debt by commercial CRAs violates democratic principles as these debts are affirmed by democratically legitimized bodies,
Amendment 42 #
Motion for a resolution Recital I b (new) I b. whereas the "issuer pays" model and the inherent conflict of interest is likely to be one reason for the faulty ratings as discovered during the financial crisis,
Amendment 43 #
Motion for a resolution Recital I a (new) Ia. having regard to the model for assessing sovereign debt used by the CRAs,
Amendment 44 #
Motion for a resolution Paragraph 1 1. Considers that, in the light of the change in the
Amendment 45 #
Motion for a resolution Paragraph 1 1. Considers that, in the light of the change in the
Amendment 46 #
Motion for a resolution Paragraph 1 1. Considers that, in the light of the change in the nature of credit ratings, where the issuer is rated to get a preferential treatment under a regulatory framework rather than to gain access to the global capital markets, the over-reliance of the global financial regulatory system on credit ratings has to be reduced as far as possible
Amendment 47 #
Motion for a resolution Paragraph 1 a (new) 1 a. Considers that competition biases caused by the common practice that credit rating agencies assess market participants while simultaneously obtaining orders from them, have to be reduced;
Amendment 48 #
Motion for a resolution Paragraph 2 2. Agrees with the principles set out by the Financial Stability Board in October 2010 giving general guidance on how to reduce reliance on external credit ratings, and welcomes the Commission's public consultation starting in November 2010; asks the Commission to review whether and how Member States use ratings for regulatory purposes in order to reduce the general over-reliance of the financial regulatory system;
Amendment 49 #
Motion for a resolution Paragraph 3 3. Points to shortcomings in the standardised approach in the Basel II regulatory framework allowing regulatory capital requirements for financial institutions to be set on the basis of external credit ratings;
Amendment 50 #
Motion for a resolution Paragraph 3 3. Points to shortcomings in the standardised approach in the Basel II regulatory framework -remaining under Basel III - allowing regulatory capital requirements for financial institutions to be set on the basis of external credit ratings; supports increased use of the internal- ratings-based (IRB) approach, provided that the size and
Amendment 51 #
Motion for a resolution Paragraph 3 3. Points to shortcomings in the standardised approach in the Basel II regulatory framework allowing regulatory capital requirements for financial institutions to be set on the basis of external credit ratings; supports increased use of the internal-ratings-based (IRB) approach, provided that the size and sophistication of the financial institution allow for an adequate risk assessment;
Amendment 52 #
Motion for a resolution Paragraph 3 a (new) 3 a. Points out that this should be considered as well in the current discussions on Basel III and its implementation by CRD IV;
Amendment 53 #
Motion for a resolution Paragraph 3 a (new) 3 a. Points out the importance to follow the developments under Basel III and the ongoing CRD IV process in this respect;
Amendment 54 #
Motion for a resolution Paragraph 3 a (new) 3 a. Asks the Commission to revise the provisions in Directive 2006/48/EC that allow for a risk weighting of 0% for exposures to Member States' central governments denominated and funded in the domestic currency of that central government;
Amendment 55 #
Motion for a resolution Paragraph 3 a (new) 3 a. Suggests that alternative measures of credit risk should be considered carefully as part of the evidence base that examines the impact and any unintended consequences of such changes;
Amendment 56 #
Motion for a resolution Paragraph 4 4. Sees the need to restore investors
Amendment 57 #
Motion for a resolution Paragraph 5 5. Expresses the view that market participants should not be authorised to invest in structured products if they cannot assess the underlying credit risk themselves
Amendment 58 #
Motion for a resolution Paragraph 5 5. Expresses the view that professional and larger and more sophisticated market participants should not invest in structured products if they cannot assess the underlying credit risk themselves, or alternatively that they should apply the highest risk weighting;
Amendment 59 #
Motion for a resolution Paragraph 5 5. Expresses the view that market participants should not invest in structured or other products if they cannot assess the underlying credit risk themselves, or alternatively that they should apply the highest risk weighting;
Amendment 60 #
Motion for a resolution Paragraph 5 5. Expresses the view that market participants should not invest in structured products if they cannot assess the underlying credit risk
Amendment 61 #
Motion for a resolution Paragraph 6 6.
Amendment 62 #
Motion for a resolution Paragraph 6 a (new) 6a. Calls on the Commission to assess the possibility of replacing or combining reference to the rating with other instruments capable of performing a similar function;
Amendment 63 #
Motion for a resolution Paragraph 6 b (new) 6b. Considers it worthwhile, when seeking alternative indexes for use in measuring credit risk, to assess the possibility of using the difference between the interest rate on the issuer’s debt and the interest rate payable on an activity deemed risk- free;
Amendment 64 #
Motion for a resolution Paragraph 6 c (new) 6c. Stresses the desirability of combining overall ratings (indicated using letters of the alphabet) with more detailed probabilistic indications of the degree of probability of default and of the loss given default;
Amendment 65 #
Motion for a resolution Paragraph 7 7. Is aware of the inherent conflict of interest if market participants devise internal credit risk assessments for their own regulatory capital requirements, and hence sees the need to increase supervisors‘ capacity and resources for monitoring, assessing and overseeing the adequacy of the internal models; if the internal models' complexity exceeds the supervisor's capacity to perform its duties, such models may not be approved;
Amendment 66 #
Motion for a resolution Paragraph 7 7. Is aware of the inherent conflict of interest if market participants devise internal credit risk assessments for their own regulatory capital requirements, and hence sees the need to increase supervisors‘ responsibilities, capacity and resources for monitoring, assessing and overseeing the adequacy of the internal models and of the risk management of such market participants;
Amendment 67 #
Motion for a resolution Paragraph 7 7. Is aware of the inherent conflict of interest if market participants devise internal credit risk assessments for their own regulatory capital requirements, and hence sees the need to increase supervisors
Amendment 68 #
Motion for a resolution Paragraph 7 7. Is aware of the inherent conflict of interest if market participants devise internal credit risk assessments for their own regulatory capital requirements, and hence sees the need to increase supervisors‘ capacity and resources for monitoring, assessing and overseeing the adequacy of the internal models; suggests that transparency of assumptions for independent academic assessment also has a role;
Amendment 69 #
Motion for a resolution Paragraph 7 7. Is aware of the inherent conflict of interest if market participants devise internal credit risk assessments for their own regulatory capital requirements, and hence sees the need to increase supervisors‘ capacity, powers and resources, for monitoring, assessing and overseeing the adequacy of the internal models;
Amendment 70 #
Motion for a resolution Paragraph 7 a (new) 7 a. In order effectively to exercise its supervisory powers, the European Supervisory Authority (European Securities and Markets Authority) should have the right to conduct unannounced investigations and on-site-inspections. When exercising its supervisory powers, the European Securities and Markets Authority should give the persons which are subject to proceedings an opportunity of being heard in order to respect their rights of defence;
Amendment 71 #
Motion for a resolution Paragraph 8 8. Highlights the global nature of the credit rating industry and urges the Commission and Member States to work on a global approach both in respect of CRA regulation and prudential and markets regulation referring to ratings in order to preserve a level playing field and prevent regulatory arbitrage while keeping markets open;
Amendment 72 #
Motion for a resolution Paragraph 8 8. Highlights the global nature of the credit rating industry and urges the Commission and Member States to
Amendment 73 #
Motion for a resolution Paragraph 8 8. Highlights the global nature of the credit rating industry and urges the Commission and Member States to work on a global approach, based on the highest standards, in order to preserve a level playing field and prevent regulatory arbitrage while keeping markets open;
Amendment 74 #
Motion for a resolution Paragraph 8 8. Highlights the global nature of the credit rating industry and urges the Commission and Member States to work together with other G20 countries on a global approach in order to preserve a level playing field and prevent regulatory arbitrage while keeping markets open;
Amendment 75 #
Motion for a resolution Paragraph 8 8. Highlights the global nature of the credit rating industry and urges the Commission and Member States to work on a global approach in order to preserve a level playing field, reduce over reliance and prevent regulatory arbitrage while keeping markets open;
Amendment 76 #
Motion for a resolution Paragraph 8 a (new) 8 a. Regards the stimulation of competition, the promotion of transparency and the question of a future pay model as the most important tasks while the question of the origin of a CRA should be secondary;
Amendment 77 #
Motion for a resolution Paragraph 8 b (new) 8 b. But stresses at the same time that more competition does not automatically imply better competition but needs to be combined with strong requirements assuring the quality of the rating to avoid phenomenon like "rating shopping";
Amendment 78 #
Motion for a resolution Paragraph 8 a (new) 8 a. Stresses the importance that all rating agencies, whether funded privately or publicly, abide by the highest standards of integrity, disclosure, transparency of historical performance and conflict of interest management as set out in the CRA Regulation No 1060/2009;
Amendment 79 #
Motion for a resolution Paragraph 8 a (new) 8 a. Transparency and consistency of ratings Considers that credit ratings must serve the purpose of increasing information to the market in a manner that provides investors with a consistent assessment of credit risk across sectors and countries;
Amendment 80 #
Motion for a resolution Subheading 4 Intermediate level: industry structure European Public Credit Rating
Amendment 81 #
Motion for a resolution Paragraph 9 Amendment 82 #
Motion for a resolution Paragraph 9 9. Calls
Amendment 83 #
Motion for a resolution Paragraph 9 9.
Amendment 84 #
Motion for a resolution Paragraph 9 9.
Amendment 85 #
Motion for a resolution Paragraph 9 9. Calls
Amendment 86 #
Motion for a resolution Paragraph 9 9. Calls for
Amendment 87 #
Motion for a resolution Paragraph 9 9. Calls for a the establishment of a
Amendment 88 #
Motion for a resolution Paragraph 9 9. Calls for
Amendment 89 #
Motion for a resolution Paragraph 10 Amendment 90 #
Motion for a resolution Paragraph 10 Amendment 91 #
Motion for a resolution Paragraph 10 10. Believes that the
Amendment 92 #
Motion for a resolution Paragraph 10 10. Believes that the start-up financing costs to cover the first
Amendment 93 #
Motion for a resolution Paragraph 10 10. Believes that the start-up financing costs to cover the first three years of the
Amendment 94 #
Motion for a resolution Paragraph 10 10. Believes that the start-up financing costs to cover the first three to five years of the ECRaF
Amendment 95 #
Motion for a resolution Paragraph 10 10. Believes that the start-up financing costs to cover the first three years of the ECRaF's work need to be carefully calculated; that these initial costs should take the form of a lump-sum capital payment and should be provided by the financial services industry with the involvement of both users and issuers; asks the Commission to produce a detailed impact assessment, viability analysis, and cost estimate for the necessary financing in this respect; considers that the new ECRaF should be fully self-sufficient after the three-year start-up period;
Amendment 96 #
Motion for a resolution Paragraph 11 Amendment 97 #
Motion for a resolution Paragraph 11 Amendment 98 #
Motion for a resolution Paragraph 11 Amendment 99 #
Motion for a resolution Paragraph 11 11. Considers that, to ensure its credibility, the management, staff and governance structure of the new
Amendment 100 #
Motion for a resolution Paragraph 11 11. Considers that, to ensure its credibility, the management, staff and governance structure of the new E
Amendment 101 #
Motion for a resolution Paragraph 11 11. Considers that, to ensure its credibility, the management, staff and governance structure of the new ECRaF need to be fully autonomous vis-à-vis the Member States, the Commission and all other public bodies and operates in accordance with amended Regulation (EC) no 1060/2009;
Amendment 102 #
Motion for a resolution Paragraph 11 11. Considers that, to ensure its credibility, the management, staff and governance structure of the new ECRaF need to be fully autonomous and not bound by instructions vis-à-vis the Member States, the Commission and all other public bodies;
Amendment 103 #
Motion for a resolution Paragraph 12 Amendment 104 #
Motion for a resolution Paragraph 12 Amendment 105 #
Motion for a resolution Paragraph 12 12. Asks the Commission to conduct a detailed impact assessment and feasibility study on the establishment of an independent ECRaF
Amendment 106 #
Motion for a resolution Paragraph 12 12. Asks the Commission to conduct a detailed impact assessment and feasibility study on the establishment of a
Amendment 107 #
Motion for a resolution Paragraph 12 12. Asks the Commission to conduct a detailed impact assessment and feasibility study on the establishment of an independent E
Amendment 108 #
Motion for a resolution Paragraph 12 12. Asks the Commission to conduct a detailed impact assessment and feasibility study on the establishment of an independent E
Amendment 109 #
Motion for a resolution Subheading 5 Amendment 110 #
Motion for a resolution Paragraph 13 Amendment 111 #
Motion for a resolution Paragraph 13 13.
Amendment 112 #
Motion for a resolution Paragraph 14 Amendment 113 #
Motion for a resolution Paragraph 14 Amendment 114 #
Motion for a resolution Paragraph 14 a (new) 14 a. Considers it important to enable users to better scrutinise CRAs and in this respect highlights the central role of increased transparency in their activities;
Amendment 115 #
Motion for a resolution Paragraph 15 15.
Amendment 116 #
Motion for a resolution Paragraph 15 15. Points out that, in order to enable investors adequately to assess risk and to fulfil their due-diligence and fiduciary duties, increased disclosure of information is necessary in the field of
Amendment 117 #
Motion for a resolution Paragraph 15 15. Points out that, in order to enable investors adequately to assess risk and to fulfil their due-diligence and fiduciary duties, increased disclosure of information about products is necessary in the field of structured finance instruments to allow investors to make informed judgments; considers that sophisticated investors should be able to rate the underlying credits from which they can then derive the risk of a securitised product;
Amendment 118 #
Motion for a resolution Paragraph 15 15. Points out that, in order to enable investors to adequately
Amendment 119 #
Motion for a resolution Paragraph 15 a (new) 15 a. Notes that, in addition to their rating activity, most Credit Rating Agencies issue a number of outlooks, reviews, warnings and watches which do have a significant impact on the markets. Is of the opinion that they should be disclosed according to predetermined criterion and protocols that ensure transparency and confidentiality;
Amendment 120 #
Motion for a resolution Paragraph 15 b (new) 15 b. Believes that increased competition in the sector should not result in “rating shopping” practices;
Amendment 121 #
Motion for a resolution Paragraph 15 a (new) 15 a. In order to reinforce competition between credit rating agencies, to help avoid possible conflicts of interest under the issuer-pays model, and to enhance transparency and the quality of ratings for structured finance instruments, asks that registered or certified credit rating agencies should be able to access information on structured finance instruments that are being rated by their appointed competitors in order to be in a position to provide unsolicited ratings.
Amendment 122 #
Motion for a resolution Paragraph 16 16. Asks the Commission to propose a revision of Directive 2003/71/EC and Directive 2004/109/EC in order to ensure that sufficient accurate and complete information on structured finance instruments is more widely available;
Amendment 123 #
Motion for a resolution Paragraph 16 a (new) 16 a. Considers it vital in this respect that data protection aspects are fully considered in any potential future measure;
Amendment 124 #
Motion for a resolution Paragraph 17 Amendment 125 #
Motion for a resolution Paragraph 17 17.
Amendment 126 #
Motion for a resolution Paragraph 17 a (new) 17 a. Recalls the compromise reached in the first revision of the CRA regulation concerning transparency of information and calls upon the Commission to keep its promises to explore all possibilities to introduce wide ranging transparency requirements concerning the ratings of all financial instruments, and vis-à-vis the whole market;
Amendment 127 #
Motion for a resolution Paragraph 17 a (new) 17 a. Notes the progress made on transparency and disclosure by CRA1 and CRA2; encourages the Commission to carry out an impact assessment of these regulations following the completion of the CRA registration process to highlight future areas where further disclosure for users may be beneficial;
Amendment 128 #
Motion for a resolution Paragraph 17 a (new) 17 a. Alongside with increased transparency of the rating process and its internal auditing, calls for stronger supervision of CRAs by EU supervisory authorities and of more intrusive supervision by national supervisory authorities of the use /dependency on ratings by financial institutions;
Amendment 129 #
Motion for a resolution Paragraph 18 18. Is of the opinion that the Commission should
Amendment 130 #
Motion for a resolution Paragraph 18 18. Is of the opinion that the Commission should
Amendment 131 #
Motion for a resolution Paragraph 18 18. Is of the opinion that the Commission should consider circumstances where it is appropriate for the use of two obligatory ratings
Amendment 132 #
Motion for a resolution Paragraph 18 18. Is of the opinion that the Commission should consider the use of two obligatory ratings for
Amendment 133 #
Motion for a resolution Paragraph 18 18. If an external credit rating continues to be used for regulatory purposes, is of the opinion that the Commission should consider the use of two
Amendment 134 #
Motion for a resolution Paragraph 18 18. Is of the opinion that the Commission should consider whether under certain conditions the use of two
Amendment 135 #
Motion for a resolution Paragraph 18 18. Is of the opinion that the Commission should consider the use of two obligatory ratings for structured finance instruments if an external credit rating is used for regulatory purposes, which might involve taking the more conservative of a bank's internal rating (produced by a validated model) and the prevailing external rating;
Amendment 136 #
Motion for a resolution Paragraph 19 Amendment 137 #
Motion for a resolution Paragraph 19 19. Considers that the costs of both ratings should be borne by the issuer and that the first rating should be by a hired CRA, at the choice of the issuer, while the second CRA should be
Amendment 138 #
Motion for a resolution Paragraph 19 19. Considers that the costs of both ratings should be borne by the issuer and that the first rating should be by a hired CRA, at the choice of the issuer, while the second should be assigned by the European
Amendment 139 #
Motion for a resolution Paragraph 19 19. Considers that the costs of both ratings should be borne by the issuer and that the first rating should be by a hired CRA, at the choice of the issuer, while
Amendment 140 #
Motion for a resolution Paragraph 19 19. Considers that the costs of both ratings should be borne by the issuer and that the first rating should be by a hired CRA, at the choice of the issuer, while the second should be assigned by the European Securities and Markets Authority (ESMA) to a different CRA on the bas
Amendment 141 #
Motion for a resolution Paragraph 19 19. Considers that the costs of both ratings should be borne by the issuer and that the first rating should be by a hired CRA, at the choice of the issuer, while the second should be assigned by the European Securities and Markets Authority (ESMA) to a different CRA on the base of merit, taking historic performance into account, but supporting the establishment of new CRAs;
Amendment 142 #
Motion for a resolution Paragraph 19 a (new) 19 a. Points out that reputation can not be imposed by a regulator, but that every new CRA will only become accepted if it gains credibility;
Amendment 143 #
Motion for a resolution Paragraph 19 a (new) 19a. Stresses that the markets appear to attach greater importance to euro zone public debt assessment by CRAs than to EU, ECT and IMF assessments; considers it necessary to restore the balance immediately and return to assessments on the basis of reliable updated and fully substantiated information;
Amendment 144 #
Motion for a resolution Paragraph 19 b (new) 19b. Takes the view that a decisive step in this direction could be the introduction of an independent European credit rating body;
Amendment 145 #
Motion for a resolution Paragraph 20 20. Is aware of the fact that market players are averse to volatile credit ratings because of the high costs involved (in related sell or buy decisions) when ratings are adjusted; considers, however, that
Amendment 146 #
Motion for a resolution Paragraph 20 20. Is aware of the fact that market players are averse to volatile credit ratings because of the high costs involved (in related sell or buy decisions) when ratings are adjusted; considers, however, that
Amendment 147 #
Motion for a resolution Paragraph 20 20. Is aware of the fact that market players are averse to volatile credit ratings because of the high costs involved (in related sell or buy decisions) when ratings are adjusted; considers, however, that smoothing practices by CRAs make ratings more likely to be procyclical and to
Amendment 148 #
Motion for a resolution Paragraph 20 a (new) 20 a. Notes that CRA's shall use clear criteria to score country performance, is aware of the fact that the actual rating is not a mechanical weighting of these factors. Asks the industry to clarify which methodology and judgements are used to calibrate sovereign ratings and to explain deviation from this model-generated ratings and from the forecasts of the main international financial institutions;
Amendment 149 #
Motion for a resolution Paragraph 20 b (new) 20 b. Is concerned about the fact that the most traditional sustainability rating drivers, such as the fiscal balance and debt level, played a proportionally greater role in driving negative rating actions than positive ones;
Amendment 150 #
Motion for a resolution Paragraph 20 c (new) 20 c. Notes that, according to the IMF, ratings could explain up to almost a 70% of the CDS spreads. Is concerned about the pro-cyclical effects that ratings may have and demands a special consideration of these sensitive issues;
Amendment 151 #
Motion for a resolution Paragraph 20 d (new) 20 d. Believes that, in order to reduce the negative “cliff effects” in prices and spreads that rating changes imply, the regulation that hardwire buy or sell decisions to ratings should be eliminated;
Amendment 152 #
Motion for a resolution Paragraph 20 a (new) 20 a. Calls the European Commission to entrust the European Court of Auditors, as an independent Institution, the rating on the sovereign debts;
Amendment 153 #
Motion for a resolution Paragraph 20 a (new) 20a. Stresses the urgent need for CRA assessments to take full account of updated information regarding national budget implementation and the effectiveness of financial adjustment and restructuring measures, so as to prevent national and European bond markets being seriously undermined by inaccurate assessments;
Amendment 154 #
Motion for a resolution Paragraph 21 21.
Amendment 155 #
Motion for a resolution Paragraph 21 21. Considers that, as almost all information on sovereigns is available in the public domain
Amendment 156 #
Motion for a resolution Paragraph 21 21. Considers that, as almost all information on sovereigns is available in the public domain,
Amendment 157 #
Motion for a resolution Paragraph 21 21. Considers that, as almost all information on sovereigns is available in the public domain
Amendment 158 #
Motion for a resolution Paragraph 21 a (new) 21 a. Believes that given the effects that credit ratings of sovereign debt can have on the market, transparency about the methods and the reasons for decisions as well as liability of CRAs need to be improved in this field;
Amendment 159 #
Motion for a resolution Paragraph 21 a (new) 21 a. Considers that sovereign debt should be exclusively rated by the European Credit Rating Foundation
Amendment 160 #
Motion for a resolution Paragraph 21 a (new) 21 a. Asks the Commission to come forward with a proposal for the creation of a public rating agency which shall be meant to be the only agency allowed to asses sovereign debt inside European Union. As a non market player, this public rating agency is excepted to have a more rational and long term perspective in the assessment of public debt and financial stability of the Union in general;
Amendment 161 #
Motion for a resolution Paragraph 21 a (new) 21a. Considers that rating of sovereign debt should be undertaken by the national courts of audit on the basis of guidelines issued by the Court of Auditors of the European Union;
Amendment 162 #
Motion for a resolution Paragraph 21 a (new) 21 a. Supports enhanced disclosure and explanation of methodologies, models and key rating assumptions adopted by credit rating agencies, also in light of the systemic impact that a downgrade on sovereign debt may produce;
Amendment 164 #
Motion for a resolution Paragraph 21 a (new) 21 a. Considers that public information on the average of existing external credit ratings from accredited CRAs is valuable; suggests therefore to establish a European Rating Index (EURIX) which incorporates all ratings of registered CRAs that are available in the market;
Amendment 165 #
Motion for a resolution Subheading 9 Micro level:
Amendment 166 #
Motion for a resolution Paragraph 22 22.
Amendment 167 #
Motion for a resolution Paragraph 22 22.
Amendment 168 #
Motion for a resolution Paragraph 22 22. Supports the existence of various payment models in the industry as long as inherent conflicts of interest are addressed by regulatory means; asks the Commission, following consultation with stakeholders, in particular the credit rating industry, to come forward with proposals for alternative viable payment models that involve both issuers and users;
Amendment 169 #
Motion for a resolution Paragraph 22 22. Supports the existence of various payment models in the industry as long as inherent conflicts of interest are addressed by regulatory means; asks the
Amendment 170 #
Motion for a resolution Paragraph 22 22. Supports the existence of various payment models in the industry as long as inherent conflicts of interest are addressed by regulatory means; asks
Amendment 171 #
Motion for a resolution Paragraph 22 22. Supports the existence of various payment models in the industry as long as inherent conflicts of interest are addressed by regulatory means and intervention keeps markets open and does not impose a model unwarranted on basis of evidence or market demand; asks the credit rating industry to come forward with proposals for alternative viable payment models that involve both issuers and users;
Amendment 172 #
Motion for a resolution Paragraph 22 22. Supports the existence of various payment models in the industry as long as inherent conflicts of interest are addressed by appropriate transparency and regulatory means; asks the credit rating industry to come forward with proposals for alternative viable payment models that involve both issuers and users;
Amendment 173 #
Motion for a resolution Paragraph 22 a (new) 22 a. Calls on the Commission to explore in detail the feasibility of alternative models such as random allocation of ratings through an independent institution, or a "payment upon results" model (deferred payments based on results), including the feasibility of combining these two models;
Amendment 174 #
Motion for a resolution Paragraph 22 b (new) 22 b. Calls upon the Commission to devise a rule to tackle the volatility of ratings by e.g. prescribing an ESMA investigation in cases of downgrades or upgrades of more than two notches per quarter;
Amendment 175 #
Motion for a resolution Paragraph 22 c (new) 22 c. Calls upon the Commission to devise rules to oblige Credit Rating Agencies to integrate potential environmental and social risks into the ratings;
Amendment 176 #
Motion for a resolution Paragraph 22 a (new) 22 a. Takes the view that good governance in CRAs is crucial to ensure the quality of ratings and calls for full transparency from CRAs on the governance arrangements in place;
Amendment 177 #
Motion for a resolution Paragraph 22 a (new) 22 a. Notes that conflicts of interests are still present and considers that the credit rating activity should respond to a new model in which tight operational is introduced (internal controls, qualification standards, etc.); asks the industry to put relevant information about their analysts (such as remuneration incentives, patrimonial interests, agenda and other relevant records) at the disposal of the supervisors;
Amendment 178 #
Motion for a resolution Paragraph 23 23.
Amendment 179 #
Motion for a resolution Paragraph 23 23. Considers that if credit ratings fulfil a regulatory purpose they should not be classified as mere opinions although it has to be recognised that ratings are predictions not fact, and that CRAs should be held accountable for the application of the methodology underlying their credit ratings; recommends therefore that CRAs‘ exposure to civil liability in the event of gross negligence be
Amendment 180 #
Motion for a resolution Paragraph 23 23. Considers that
Amendment 181 #
Motion for a resolution Paragraph 23 23. Considers that if credit ratings fulfil a regulatory purpose or are done on sovereign debt they should not be classified as mere opinions, and that CRAs should be held accountable for their credit ratings; recommends therefore that CRAs
Amendment 182 #
Motion for a resolution Paragraph 23 23. Considers that if credit ratings fulfil a regulatory purpose they should not be classified as mere opinions, and that CRAs should be held accountable for their credit ratings; recommends therefore that CRAs‘
Amendment 183 #
Motion for a resolution Paragraph 23 23. Considers that if credit ratings fulfil a regulatory purpose they should not be classified as mere opinions, and that CRAs should be held accountable for their credit ratings; recommends therefore that CRAs
Amendment 184 #
Motion for a resolution Paragraph 24 24. Points out that the ultimate responsibility for an investment decisions lies with the financial market participant, i.e. the asset manager, financial institution or sophisticated investor; notes that accountability will also be further supported by the central repository (CEREP) established by CRA1, which publishes data in a standardised form on the performance of ratings issued by CRAs registered within the EU. This will allow investors to make their own assessment about certain CRAs, thereby exerting more reputational pressure;
Amendment 185 #
Motion for a resolution Paragraph 24 24. Points out that the ultimate responsibility for an investment decisions lies with the financial market participant, i.e. the asset manager, financial institution or sophisticated investor; these should have effective risk management capabilities subject to adequate oversight by the administration;
Amendment 186 #
Motion for a resolution Paragraph 25 25. Suggests that each registered CRA should
Amendment 187 #
Motion for a resolution Paragraph 25 25. Suggests that each registered CRA should conduct an annual review to assess its past credit rating performance and should compile this information in an accountability report for the supervisor; suggests that the ESMA should carry out random checks on accountability reports on regular basis to ensure a high quality standard in credit ratings;
Amendment 188 #
Motion for a resolution Paragraph 25 a (new) 25a. Considers that an effective civil liability system for CRAs could stimulate innovation; notes that at present the system governing agencies’ liability is unclear;
Amendment 189 #
Motion for a resolution Paragraph 25 a (new) 25 a. Considers that, in particular in prospectuses, it should be indicated whether a rating was solicited or not and who commissioned and paid for it. All ratings should be published in prospectuses.
Amendment 190 #
Motion for a resolution Paragraph 25 b (new) 25 b. Calls upon the Commission to devise a rule to make sure that when a rating analyst switches jobs, the analyst’s ratings will be reviewed and the job change will be made public.
Amendment 191 #
Motion for a resolution Paragraph 25 a (new) 25a. Considers that the assessment of the ‘country risk’ of sovereign debt is just as much political as economic and that the team of analysts responsible for assessing this risk should therefore reflect a wide range of opinion; takes the view that the composition of these teams should be very transparent and public;
source: PE-454.677
2011/09/02
JURI
15 amendments...
Amendment 1 #
Draft opinion Recital A A. whereas it welcomes the ongoing work on regulation in the credit rating agency industry and encourages all actors
Amendment 2 #
Draft opinion Recital B Amendment 3 #
Draft opinion Recital B B. whereas the structure of the rating industry is heavily concentrated,
Amendment 4 #
Draft opinion Recital B a (new) Ba. whereas the CRAs fall under the provision of the Regulation EC 2009/1060, as amended in order to give ESMA supervisory attributions,
Amendment 5 #
Draft opinion Paragraph -1 a (new) -1a. Recommends that financial institutions should be encouraged to perform internal risk assessments, while smaller financial institutions should at least understand the methods used to produce the credit ratings which they use and publish an internal assessment plan, which they must adhere to;
Amendment 6 #
Draft opinion Paragraph -1 b (new) -1b. Calls for special regulatory requirements to be met for the assessment of sovereign debt; recommends informing the State which is being assessed three days before publication of the credit rating, publishing all inquiries and sources on which the credit rating is based, announcing the staff resources used and reducing the interval between reviews of the credit rating to six months;
Amendment 7 #
Draft opinion Paragraph 1 1. Calls on the Commission to encourage existing businesses to become registered as CRAs under European legislation by reducing barriers to entry
Amendment 8 #
Draft opinion Paragraph 1 1. Calls on the Commission to encourage existing businesses to become registered as CRAs under European legislation by reducing barriers to entry or to expand in the CRA sector
Amendment 9 #
Draft opinion Paragraph 2 Amendment 10 #
Draft opinion Paragraph 2 2. Asks the Commission to e
Amendment 11 #
Draft opinion Paragraph 3 Amendment 12 #
Draft opinion Paragraph 3 3.
Amendment 13 #
Draft opinion Paragraph 3 a (new) 3a. Suggests that the Commission introduce common liability rules for deliberate and negligent infringements by rating agencies of the provisions of Regulation (EC) No 1060/2009, particularly in cases in which investors suffer damage due to an investment decision based on an erroneous rating;
Amendment 14 #
Draft opinion Paragraph 4 4.
Amendment 15 #
Draft opinion Paragraph 4 4. Stresses that all measures should be taken in order to avoid
source: PE-458.578
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