Credit Rating Agencies on the Watch List
Analysis of European Regulation

Credit rating agencies have been criticized for their role in the financial crisis by understating credit risk. The US subprime mortgage crisis highlighted the systemic relevance of the rating agencies and the deficiencies in their activities; this led to an international consensus to regulate the rating business. Written by those involved in developing European Legislation, this book explains EU Regulation in the context of global initiatives undertaken by the G-20, the Financial Stability Board, and IOSCO to address failures within the rating industry. Through an in-depth analysis of the EU Regulation's requirements on governance, conflicts of interest, methodologies, and transparency, the book provides a clear explanation of how rating agencies operate and how the identified failures have been addressed. Moreover, it examines the supervisory and enforcement powers of ESMA, the EU authority in charge of the registration and oversight of rating agencies. This is complemented with an analysis of guidance from supervisors (ESMA and EBA), IOSCO's recommendations, and US legislation. The book discusses possible new regulatory developments in areas such as the agencies' business model, competition, civil liability, and ratings of sovereign debt, in light of the Euro debt sovereign crisis. It concludes with the authors' support for an enhanced regulatory and oversight coordination at international level and for the implementation of the necessary steps to reduce the existing over-reliance on ratings.

1. Introduction. 2. Financial Crisis: Global Regulatory Reaction. 3. Analysis of the EU Credit Rating Agencies Regulation. 4. Use of Non-EU Ratings in the EU. 5. Future Developments. Appendices. Glossary.

Raquel García Alcubilla has developed her career in different departments of the CNMV, mainly in the Primary Markets Division. From 2006 to 2010 she combined her job at the CNMV with the position of Senior Officer at ESMA in the areas of rating agencies, prospectus, and takeovers. She holds bachelor's degrees in both Law and Economics from the Comillas Pontifical University (ICADE) and a bachelor's degree in Political Science from the Spanish National University of Distance Education (UNED).; Javier Ruiz del Pozo is responsible for rating agencies' oversight and policy issues. In addition, he oversees a team dealing with public offers and listing of securities, including securitizations deals. From 2006 to 2008, he was Director of Financial Information at ESMA in charge of rating agencies, accounting and auditing, prospectus, takeovers, ongoing disclosure requirements on listed companies, and corporate governance. He holds a bachelor's degree in Law from the University of Navarra.