EU asks for information on how Credit Ratings are used

In doing something slightly different for financial regulation matters, this post is just a small update for those connected or interested in the credit rating industry. The EU, on the 30th March, has published a call for comments on the availability and use of credit rating information and related data. As stated on the ESMA’s website, ‘the purpose of this call for evidence is to gather information on the specific uses of credit ratings as well as how the users of credit ratings are currently accessing this information’. This reflects an alteration in regulatory direction that a number of entities have been calling for – instead of just focusing on the rating agencies and mis-regulating because of a lack of scope, a greater focus needs to be placed on the users of credit ratings. This call for information is the EU’s attempt to start that process. I am reminded of my own journey in which the scholarly literature is massively negative regarding the credit rating industry and its usefulness, but in having spoken to a number of practitioners, there were more people than I had anticipated who found the ratings useful in their business practices – this is, of course, not to say that this sentiment is universally shared amongst practitioners. Yet, regulatory speaking, this is a positive move from the EU and, arguably, should have happened much sooner. It seems to be a direct reaction to the phenomenon we are witnessing at the moment; a lot of regulatory capital was expended on reducing regulatory reliance, and the use of credit rating subsequently increased, rather than decrease had many had expected.

The call is currently open and will remain open until the 3rd August 2020. ESMA have stated that ‘input is welcomed from all interested stakeholders, including users of credit ratings such as public authorities and financial market participants, credit rating agencies, as well as distributors of credit rating data’. The aim of the endeavour is to consider options that will improve access to and use of credit ratings, and also whether there is scope to improve the usability of the information provided for on rating agencies’ websites – the sentiment to this can be seen to be somewhat of an antithesis to the sentiment that was promoted when ending regulatory reliance was at the forefront of global regulatory efforts.


The call for information itself is available here.

Comments

Post a Comment

Popular posts from this blog

Lloyds Bank and the PPI Scandal: The Premature ‘Out of the Woods’ Rhetoric

Image
Today’s very short post focuses upon the news that the Financial Conduct Authority (FCA) has recently extended the deadline to claim compensation for mis-sold ‘Payment Protection Insurance’ (PPI). Whilst a lot of financial institutions will have to prepare to offset the extended deadline, it is Lloyds that has grabbed the business headlines by apportioning an extra £350 million to offset any further claims that may be made of it – however, this comes only a week or two after the Bank posted its best performance figures in over a decade, as was previously discussed in Financial Regulation Matters . This post will therefore argue that the rhetoric being advanced recently regarding Lloyds – rhetoric like Lloyds represents ‘ a modern day success story ’ is wide of the mark and creates a false sense of security that we simply cannot afford to believe in. The ‘ robust recovery ’ was heralded far and wide upon the publication of Lloyds Bank’s financial performance for the previous fi...
Read more

The Analytical Credit Rating Agency: A New Entrant That Will Further Enhance Russia’s Isolation

Image
This short post is based upon a forthcoming article by this author that examines the viability of the latest entrant into the credit rating arena, the Analytical Credit Rating Agency (ACRA). The article, which is due to be published in the European Company Law Journal (and is available here in a pre-published version), looks at the chances of the ACRA succeeding when viewed within the parameters of perception , an aspect that underpins the credit rating sector. For this post, the focus will be upon introducing the ACRA, and then on examining the effect it may have upon the wider political issues affecting the Russian Federation. The Analytical Credit Rating Agency was established in November 2015 and comprises of 27 major Russian companies and financial institutions that serve as its shareholders. The agency, which became the first rating agency to receive accreditation from the Russian Central Bank under the new N 222-FZ Law which was designed to protect investors, has a re...
Read more

British McDonald’s Workers To Go On Strike: The Enduring Legacy of Corporate Greed and Political Irresponsibility

Image
Today’s post reacts to the news that next week, in the UK, workers will make history by staging a strike at two McDonald’s restaurants – one in London and one in Cambridge. The first strike of its kind in McDonald’s British history is a result of poor working conditions, the use of the infamous ‘zero-hour’ contracts, and a demand for an increase in the minimum wage paid to McDonald’s employees. In this post this particular story will be used a vehicle to cover an aspect that has almost become accepted in the mainstream media, unfortunately, and that is the concept of austerity and its repulsive effects. Whilst onlookers hope that the strike will see a revolution-of-sorts amongst the fast-food industry with regards to working conditions, the reality it is that the underlying causes of the grievances aired by the staff will remain whatever the outcome of the strike, as the problem is a systemic problem. The proposed strike, which is scheduled to take place on Monday 4 th Septembe...
Read more