ESMA has published two sets of technical advice and a report on the regulation of credit rating agencies (CRAs) in the EU. These provide an overview of competition, give insight into the market dynamics of the industry and consider measures to provide stronger controls around CRAs. Key findings include:

  • most of the 24 CRAs registered in the EU focus on a particular asset class or Member State;
  • high fees and regular fee increases from some CRAs suggest there may be little effective competition in some specific market segments;
  • measures adopted to improve investor confidence and stimulate competition for the provision of structured finance ratings following the financial crisis have had little impact; and
  • regarding reducing reliance on ratings, references to credit ratings still remain in national and EU legislation, as well as within the collateral frameworks of some central banks.

ESMA notes future action should focus on mitigating mechanistic reliance on credit ratings rather than removing them from legislation entirely. (Source: ESMA Reports on Credit Rating Industry Reform)