Brussels, 02/12/2010 (Agence Europe) - The European Parliament (EP) and Council reached a political agreement in principle on the draft regulation transferring supervision of ratings agencies to the new European Securities and Markets Authority (ESMA) in the evening of Wednesday 1 December at an informal trialogue meeting (see EUROPE 10262). “The text has been approved. We have an agreement,” EP rapporteur Jean-Paul Gauzès (EPP, France) told EUROPE. “It's a good agreement and just what is needed,” he added. Final adoption of the legislative text will mean that the new rules can come into force at the start of January to coincide with the new European authority taking up its functions. On Wednesday 8 December, the Belgian Presidency will submit the compromise text to national ambassadors to the EU. Political agreement will be formally sealed in mid-December with the EP plenary session vote.
The final discussions focused on the issue of publication of information needed to assess financial products to be rated. To encourage unsolicited ratings, the European Commission proposed that this information should be published on an encrypted internet site to which ratings agencies not remunerated by the issuers of the rated product would have access. On a suggestion by the Greens Group, the EP took the view that this information should refer to all rated financial instruments, not just structured products. The industry was very much against this move. Ultimately, the two European joint legislative institutions agreed to delay any such measure to a later date in order to align the EU and American legal frameworks. “Just as the United States decided to delay implementation of its system, we have put back ours,” Gauzès said. The compromise text speaks of continued debate in this area as part of the amendment of the legislation in spring.
ESMA. Requests for approval from ratings agencies will be submitted to ESMA which will assess them and either give or withhold authorisation. ESMA will also be responsible for prudential supervision of the activities of these bodies. As the EP wanted, the European Authority will have the power to impose a financial penalty on any ratings agencies which breach European legislation. The amount of these fines could be up to 20% of the agencies' turnovers.
The 2009 European regulation (1060/2009) governing ratings agencies will come fully into force on Tuesday 7 December. At the present time, though most existing ratings agencies have applied to their national supervisors for approval, only Euler Hermes CRA has been granted it. After 7 December, agencies which have still to be approved will be able to continue to issue ratings unless their application for registration has been turned down. (M.B./transl.rt)