On February 1, 2016, the European Court of Auditors published a report on the role of ESMA as the single supervisor of Credit Rating Agencies in the European Union. The report covers the period from when ESMA took over the role of supervisor for CRAs from national regulators in July 2011 until September 2015. It aims to assess whether ESMA has effectively established itself as the CRA supervisory body for the EU. The report states that ESMA has set good foundations in a short amount of time, but that significant risks still need to be addressed in the future. The ECA recommends, amongst other things, that ESMA should: (i) document its assessment of all regulatory requirements for credit rating methodologies throughout the registration process; (ii) update its supervisory manual and handbook on a regular basis so as to take into account the knowledge and experience it has gained; (iii) contemplate developing further guidance on disclosure requirements to improve the methods of disclosure of CRAs; (iv) examine certain possible conflicts of interest in a structured manner, regarding rating analysts’ trading activities and financial transactions, so as to mitigate the risk of insider trading; and (v) enhance the traceability of the risk identification process, documenting changes to risk level as well as the prioritization of risks and following up on high-risk areas that could benefit from further supervisory attention.
The report is available at: http://www.eca.europa.eu/Lists/ECADocuments/SR15_22/SR_ESMA_EN.pdf.