The European Securities Markets Authority (ESMA) has published a report, "Credit Rating Agencies: Sovereign Ratings Investigation-ESMA's Assessment of Governance, Conflicts of interest, Resourcing Adequacy and Confidentiality Controls". This report summarises the findings of ESMA's general investigation into sovereign credit ratings issued by Fitch Ratings, Moody's Investor's Service and Standard and Poor's which took place earlier this year. In this report ESMA describes the observed deficiencies and main concerns while also identifying a number of good practices in the following areas:

  • the role of senior management and other non-rating functions in the rating process and the actual or potential conflicts of interest which could arise;
  • the actual or potential conflicts of interest generated by the involvement of sovereign analysts in research and publication activities;
  • confidentiality of sovereign rating information and controls in place prior to publication of ratings (including IT and access controls to confidential information);
  • timing of publication of sovereign ratings, including timely disclosure of rating agencies;
  • monitoring of the adequacy and expertise of resources dedicated to sovereign ratings.

ESMA's investigation received short comings in the sovereign ratings process which could pose risks to the quality, independence and integrity of the ratings and of the rating process.