On 30 September ESMA published technical advice on competition, choice and conflicts of interest in the credit rating industry.

The Technical Advice draws together ESMA’s reflections on how the objectives of the CRA Regulation are being achieved in practice. It also presents data submitted by credit rating agencies (CRAs) to ESMA’s Central Repository (the CEREP database) and the responses received to ESMA’s Call for Evidence on Competition, Choice and Conflicts of Interest in the CRA Industry which ran from 5 February 2015 until 31 March 2015.

The Technical Advice concludes that the CRA Regulation already appears to have had a positive impact on the governance and operation of CRAs overall. However, it is important to wait and see how the markets develop in response to the implementation of the CRA Regulation before considering the adoption of further measures. This assessment should be revisited by ESMA within the next 3-5 years depending on changes in market dynamics. In light of the concerns raised in the Technical Advice about their effectiveness, ESMA will, in particular, keep the following provisions under review:

  • Article 6 and Annex I regarding conflicts of interest;
  • Article 6b regarding mandatory rotation;
  • Article 8d regarding the requirement to consider using CRAs with less than a 10% market share; and
  • Annex I Section B 3c regarding fees charged by CRAs for credit ratings and ancillary services.