The European Commission has put forward a proposal for a regulation on credit rating agencies. This forms part of a wider package of proposals to deal with the financial crisis. In October 2007 EU Finance Ministers agreed to a set of objectives in response to the crisis (the Ecofin Roadmap), which included a proposal to assess the role played by credit rating agencies and to address any relevant deficiencies.

The proposal lays down conditions for the issuance of credit ratings that are needed to restore market confidence and increase investor protection. It introduces a registration procedure for credit rating agencies to enable European supervisors to control the activities of rating agencies whose ratings are used by credit institutions, investment firms, insurance, assurance and reinsurance undertakings, collective investment schemes and pension funds within the Community.

Credit rating agencies will have to comply with rigorous rules to make sure that: i) ratings are not affected by conflicts of interest; ii) they remain vigilant on the quality of the rating methodology and the ratings; and iii) they act in a transparent manner. The proposal also includes an effective surveillance regime whereby European regulators will supervise credit rating agencies.

Some of the proposed rules are based on the standards set out in the International Organisation of Securities Commissions (IOSCO) code. The proposal gives those rules a legally binding character.