The European Parliament and Council have approved the proposed Regulation on CRAs. The Regulation will be directly applicable in Member States 20 days after it is published in the OJ. Member States have six months to implement the new provisions, but there is a transitional period of 18 months for the use of ratings of non-EU agencies.
Under the Regulation:
- any credit agency that wants its ratings used in the EU must apply to CESR for registration; an appropriate college of regulators will decide on the application and be responsible for day-to-day supervision;
- there will be specific rules for non-EU-based agencies who are subject to home jurisdiction regulation at least as strict as the new Regulation;
- rules will ensure CRAs are not affected by conflicts, stay vigilant on the quality of ratings themselves and methodologies and act transparently;
- CRAs cannot give advice;
- CRAs must not rate instruments on which they have insufficient quality information; and
- CRA boards must include at least two independent directors whose remuneration does not depend on the agency's performance.