EU to limit rating actions 3 times per year on member states
2013-06-19 11:22:40
The European Union (EU) would put stricter rules on credit ratings agencies on June 20, aiming at financial stability, the European Commission said in a statement Tuesday.
"Under the new legislation, credit rating agencies will have to be more transparent and accountable when rating sovereign states. The new rules will also contribute to increased competition in the ratings industry currently dominated by a few market players and will reduce the over-reliance on ratings by financial market participants," commissioner for internal market and services Michel Barnier said.
Under such rules, rating agencies must set up a calendar indicating when they will rate EU member states.
"Such ratings will be limited to three per year for unsolicited sovereign ratings," according to the rules.
To avoid market disruption, the rules also include requirements such as unveiling more details on rating information, reducing range of financial product could be rated.
Despite the adoption of European legislation on credit rating agencies in 2009 and 2010, the developments in the context of the euro debt crisis have shown the need for the regulatory framework to be strengthened.
As a result, in November 2011 the Commission put forward proposals to reinforce the regulatory framework and deal with outstanding weaknesses. The new rules enter into force on June 20 2013.