Since January 2019, the European Securities and Markets Authority (ESMA) has been conducting a public consultation on the issue of internal controls within credit rating agencies operating within the jurisdiction. Based on observations between 2017 and 2018 that identified a number of shortcomings in this area of the CRAs practices, ESMA has been working at providing clear guidelines to help the industry move forward. Today, that report was released.   Based on the CRA Regulation (CRAR) , ESMA are required to ensure that regulations are developed and implemented relating to the internal control systems of the CRAs, which they must have in place ‘ in order to prevent or mitigate any possible conflicts of interest and ensure the integrity of its credit rating activities ’. As we know, this is a common, but no less important objective of rating agency regulators, and it is interesting to note that, more than a decade after the Financial Crisis, regulators are still attempting to ...

Efforts to relieve the financial pressure on the world’s poorest countries since the pandemic started have resulted in very little progress. UN, IMF, and World Bank efforts have led to the establishment of the Debt Service Suspension Initiative (DSSI), that consisted of members of the so-called ‘Paris Club’ and other prominent non-members, like China, suspending the rights to collect payments on their investments into poorer countries. However, there are so many issues with this plan, that not only has it not been entirely successful but it has also led to a lack of inspiration in similar efforts but from the private sector – and the involvement of the private sector is crucial. This has led critics to suggest that credit rating agencies have a role to play and, furthermore, should be more engaged in finding a solution. However, is this really the case, or is it yet another example of onlookers not fully understanding the ‘rating dynamic’ as I like to call it, and calling for action an...

In today’s short post, news regarding the plans of the International Organisation of Securities Commissions to set global standards in relation to ESG disclosure will be considered, particularly in relation to the trajectory of ESG rating agencies and their inherent issues. Though IOSCO’s recommendations would not be binding, they are influential and, as we shall discuss, the fact that the EU is currently considering its approach in this sector may prove to be perfect timing for some coordination in this field. However, what will it mean for the ESG rating agencies who are coming under fire recently for a lack of timely and comparable analysis?   The Financial Times reported yesterday that the IOSCO is planning on taking action with regards to the disparate set of rules regarding ESG disclosure across the spectrum . Research has suggested that there are more than 10 standards that suggest frameworks for how ESG-related information should be disclosed . Even via the European Un...

In this post, we will review the story today that a number of leading German financial institutions are taking aim at the Big Three credit rating agencies, specifically in relation to the fees they charge for their credit rating-related data feeds. This issue of transparency, particularly with regards to the provision of ancillary services, their cost, and the impact that it has upon the rating dynamic moreover, is not a new phenomenon. In fact, this was the very subject of my 2018 book Regulation and the Credit Rating Agencies; Restraining Ancillary Services which you can preview here , and purchase here .   In news published by Reuters today, it was stated that the Fund Association BVI, and the Insurance industry body GDV are in the process of making a joint appeal to the European Commission regarding the lack of transparency over the pricing structures from the ancillary service-wings of the credit rating agencies. The BVI today declared that the rating agencies are exploi...