In today’s post the focus is on a story that has not picked up much ground in the financial press, but one which raises massive issues. The story, reported by Sky News , describes how the former Chair of the Treasury Select Committee and someone who we have profiled before here in Financial Regulation Matters , Andrew Tyrie, is potentially considering establishing some sort of ‘board’, akin to the Banking Standards Board , to oversee the regulation and standards in the auditing industry. Whilst there is very little to the story so far, the inference that emanate from the story inspire the direction of this post, with the aim being to ask whether such an organisation would be required, and welcome, should it come to fruition. The news report simply states that Tyrie has been recently speaking to members of the Big Four auditing firms – PricewaterhouseCoopers (PwC), Deloitte, Ernst & Young (E&Y), and KPMG – and their regulator – the Financial Reporting Council (FRC) – a...

Today’s post assesses the news that the European Securities and Markets Authority (ESMA) has had its decision to reject Polish rating agency FinancialCraft’s application to be registered under EU regulation upheld, after an appeal was lodged to the Joint Board of Appeal of the European Supervisory Authorities. In this post we will look at some of the reasons for the rejection and assess whether the grounds for rejection were fair, especially in relation to recent instances of the larger rating agencies flouting the European regulations. FinancialCraft , a small Polish rating firm, had applied in 2016 to be registered as a recognised Credit Rating Agency under the EU Regulations on Credit Rating Agencies; on the 8 th of December 2016 that application was rejected by ESMA , the supervisory body tasked with supervising the CRA sector. In accordance with the regulations, which allow for a second application, FinancialCraft swiftly reapplied, with the same rejection following. As a ...

Today’s post previews a forthcoming article by this author, entitled ‘Artificially Increasing Competition in the Credit Rating Industry: The ESMA Meets an Immovable Object’, which will be published in the European Company Law Journal (available here in a pre-published form). The paper is concerned with the recent push by the European Securities and Markets Authority (ESMA) to enforce an increase in competition within the credit rating industry, particularly with regards to the rating of structured products. However, even though the rules that dictate that regional authorities must endeavour to enforce this new regulatory drive are clear, an analysis of the reality of the situation reveals that the only actor that can realistically dictate the movement of the industry, with regards to its output and internal competition, are the investors who use the ratings of the largest agencies. The article begins by looking at the regulatory and legislative attempts from both the U.S. and t...

Today’s post looks at the news that BT, the giant telecommunications company, has switched its auditor for the first time in 33 years due to the failings of PricewaterhouseCoopers (PwC) regarding the recent Italian accounting scandal that cost BT £530 million. Although we spoke about the scandal very briefly here in Financial Regulation Matters before, it will be worth going over the scandal again to examine what the actual failings of the auditing firm were. Upon doing this, it will be good to examine the recent trends affecting the accountancy industry in terms of regulations because, in a move that is echoed in a forthcoming book by this author regarding credit rating agencies, a powerful position does not have to mean one is immune to regulation – in fact, it should be the opposite. The accounting scandal at the Italian division of BT started in October of last year, when the company reported that it had taken a £145 million hit after uncovering ‘ inappropriate management ...