Brussels, 23/11/2010 (Agence Europe) - On Monday 22 November, MEPs on the European Parliament's economic and monetary affairs committee endorsed the European Commission's idea of transferring supervision of ratings agencies to the soon-to-be-created European Securities and Markets Authority (ESMA) (see EUROPE 10151). In a press release, the EP rapporteur on the issue, Jean-Paul Gauzès (EPP, France), said that the path towards improved supervision of the financial ratings agencies at EU level was now open. Informal international discussions will kick off on Wednesday in order to reach agreement in principle by the end of the year.
The MEPs say that in July 2011, ESMA should start receiving authorisation applications from ratings agencies that it should then assess and grant or reject, with authorisations issued before July 2011 remaining valid. ESMA should also be given the power to monitor the work of ratings agencies. By July 2014, ESMA should examine all ratings agencies authorised to operate in the EU and should make surprise spot checks of the ratings issued. Ratings agencies would have three days to provide information about the methodology used and if ESMA decides that a rating is not based on objective criteria, then it would be able to demand explanations and examine all the other ratings issued by the same agency. If it detects significant discrepancies between the ratings issued by various agencies for the same structured financial product, ESMA shall proceed to examine them. It will be granted greater powers to carry out inspections on the ground.
Fines. The EP committee gives ESMA the power to fine ratings agencies that infringe EU legislation. The initial draft legislation only gives this power to the European Commission, acting on request from ESMA. Fines may be set at a higher level than the benefits that would have accrued to the agency because of the infringement of the rules in question and will be set on the basis of criteria like the duration of the infringement, the extent to which it is deliberate and the losses suffered by investors.
By 2012, ESMA will report on staffing and resource needs relating to the expansion of its powers. The Commission is asked to publish a report on the option of harmonising the prices changed for ratings. (M.B./transl.fl)