Brussels, 14/05/2013 (Agence Europe) - On Monday 13 May, the Council of the European Union endorsed the draft directive on credit rating agencies. The idea is to reduce investor over-reliance on external credit ratings, mitigate the risk of conflicts of interest and set up a civil liability system.
In order to make the credit rating industry more competitive, a rotation system will be introduced but only for issuers of structured financial products with underlying re-securitised assets. It will, however, be possible to extend the scope of application to other products in the future. It will be made compulsory to publish details of shareholders owning at least 5% of the capital or voting rights of a rated company. The share of capital owned by an investor in a number of agencies may not exceed 5% and agencies will be banned from rating a company or body of which it owns more than 10% (of the capital). The new rules say that investors or issuers will be able to claim damages from a credit rating agency if the investors suffer a loss due to an infringement committed by the agency intentionally or with gross negligence. The rating of sovereign debt must be done every six months at the very least rather than annually. The European Commission will unveil a report by July 2016 on the credit rating market and will issue new proposals, if necessary. (EL/transl.fl)