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MEPs back CRA powers in huge numbers

Wednesday 15 December 2010 - by Will Henley

Credit rating agencies in the EU will be subject to intense scrutiny from next year after the European Parliament on Wednesday backed new supervisory powers by 611 votes to 15 against.

Rapporteur Jean-Paul Gauzès of the European People's Party Group hailed the vote as a chance to improve oversight of rating criteria by the new European Securities and Markets Authority, which is set to begin operations on 1 January.

"With this vote," Gauzès said, "the European Securities and Markets Authority will be able to exercise its powers as soon as it is operational, at the beginning of 2011."

"The work of the last two years is bearing its fruits."

The vote, which saw some 26 abstentions, means that ESMA - rather than the European Commission - will have the power to impose fines of up to 20 per cent of a CRA's turnover.


It will also be able to conduct dawn raids on CRA offices. ESMA is also to be responsible for ensuring that CRAs comply with a "back testing" obligation, comparing performance predictions for rated financial instruments with actual performance.


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