Credit rating agencies (CRAs) are major players in today's financial markets, with rating actions having a direct impact on the actions of investors, borrowers, issuers and governments.
Four main goals of the proposed draft Directive and draft Regulation
1. To ensure that financial institutions do not blindly rely only on credit ratings for their investments.
Ratings currently have a quasi-institutional role. We need to reduce our reliance on them. Our proposals in July 2011 on the Capital Requirements Directive IV reduce the number of references to external ratings and require financial institutions to do their own due diligence.
2. More transparent and more frequent sovereign debt ratings.
Member States would be rated more frequently (every six months rather than 12 months) and investors and Member States would be informed of the underlying facts and assumptions on each rating.
3. More diversity and stricter independence of credit rating agencies to eliminate conflicts of interest.
Issuers would have to rotate every three years between the agencies that rate them.
4. To make CRAs more accountable for the ratings they provide.
A CRA should be liable in case it infringes, intentionally or with gross negligence, the CRA Regulation, thereby causing damage to an investor having relied on the rating that followed such infringement.