Abstract
“The financial crisis, which started as the US sub-prime crisis in 2007, escalated into a full-blown economic crisis and raised significant political challenges in Europe”. The European Union (EU) 2009 regulation was in response to the economic and financial crisis. There was a need to restore confidence and prevent a similar situation occurring in the future. Similar to the US, the principal aim of the regulation is to protect the stability of financial markets and give investors the information and impartiality they need from CRAs to enable them to make prudent investment decisions. Its accomplishment is expected to create growth and jobs. To ensure that credit ratings issued by CRAs are reliable requires their activities to conform to the principles of integrity, transparency, responsibility and good governance. This will in turn ensure that credit ratings are independent, objective and of adequate quality.
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Notes
- 1.
Liikanen et al. (2012), p. 1.
- 2.
Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, Official Journal of the European Union (17.11.2009), pp. 1–31. http://www.esma.europa.eu/system/files/L_302_1.pdf.
- 3.
See Rousseau (2009).
- 4.
“Proposal for a Regulation of the European Parliament and of the Council on Credit Rating Agencies, Brussels (12 November 2008)”, herein after called “Proposal for Regulation (2008)”. http://ec.europa.eu/internal_market/securities/docs/agencies/proposal_en.pdf.
- 5.
“Regulation (EC) No 1060/2009 of The European Parliament and of The Council of 16 September 2009 on credit rating agencies”, herein after called “Regulation (2009)”. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:302:0001:0001:EN:PDF.
- 6.
Barroso (2009).
- 7.
See Commission Decision of 6 June 2001, establishing the Committee of European Securities Regulators, 2001/527/EC (OJ L191, 13 July 2001), p. 43.
- 8.
For the definition of “true and fair view”, see Glossary.
- 9.
Commission Directive 2003/125/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and the Council as regards the fair presentation of investment recommendations and the disclosure of conflicts of interest (OJ L 339 24 December 2003), p. 73.
- 10.
Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on Insider Dealing and Market Manipulation (OJ L 96, 12 April 2003), p. 16.
- 11.
Recital 10 of Directive 2003/125/EC.
- 12.
Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (OJ L 177, 30.6.2006), p. 1.
- 13.
Coffee and Lannoo (2010), p. 13.
- 14.
Recognition mechanism is outlined in Annex VI Part 2 of the Capital Requirements Directive.
- 15.
Guidelines on the recognition of External Credit Assessment Institutions of 20 January 2006 (GL07). http://www.c-ebs.org/formupload/41/413b2513-5084-4293-a386-16385b80411d.pdf.
- 16.
20 June and 16 October 2008, Brussels (23 April 2009). http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/629.
- 17.
See Chap. 3.
- 18.
Andenaes and Deipenbrock (2012), pp. 1–17.
- 19.
See Article 6 (5), Proposal for a Regulation (2008).
- 20.
Proposal for a Regulation (2008), p. 5.
- 21.
Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003. OJ L 96 (12.4.2003), p. 16.
- 22.
Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006. OJ L 177 (30.6.2006), p. 1.
- 23.
Ibid., p. 201 refer to the Credit Rating Agencies.
- 24.
Staikouras (2012), p. 71.
- 25.
Article 15 (1), Application for Registration, Regulation (2009), p. 14.
- 26.
Regulation (2009), p. 1.
- 27.
Ibid., p. 3.
- 28.
Regulation (2009), Clause 23, p. 3.
- 29.
See ESMA (2011), p. 3.
- 30.
Regulation (2009), Clause 23, p. 3.
- 31.
Ibid.
- 32.
Marston (2013).
- 33.
Ibid.
- 34.
Regulation (2009), p. 3.
- 35.
Bahena (2010).
- 36.
Regulation (2009), p. 3.
- 37.
Bolton et al. (2010).
- 38.
Proposal for a Regulation of the European Parliament and of the Council on Credit Rating Agencies, Brussels (12 November 2008), p. 12, http://ec.europa.eu/internal_market/securities/docs/agencies/proposal_en.pdf.
- 39.
See Chap. 6.
- 40.
Proposal for a Regulation (2008), p. 12.
- 41.
Regulation (2009), p. 4. See also Amtenbrink and De Hassan (2009), pp. 1915–1949.
- 42.
Regulation (2009), p. 4.
- 43.
European Commission, Press Release, Commission wants better quality credit ratings (15 November 2011). http://eropa.eu/rapid/pressreleaseaction.do?/reference=ip/11/1355.
- 44.
Regulation (2009), p. 4.
- 45.
Ibid.
- 46.
Ibid.
- 47.
Ibid.
- 48.
Ibid.
- 49.
Ibid.
- 50.
Milken Institute (2002), p. 1.
- 51.
See Chap. 6.
- 52.
Regulation (2009), p. 4.
- 53.
Ibid.
- 54.
Ibid.
- 55.
Proposal for a Regulation (2008), pp. 8–9.
- 56.
Ibid., p. 9.
- 57.
Regulation (2009), p. 5.
- 58.
Proposal for Regulation (2008), p. 5.
- 59.
Regulation (2009) para 10, p. 2, See also, Sève (2010).
- 60.
Regulation (2009), p. 8.
- 61.
Regulation (2009), p. 5.
- 62.
Ibid.
- 63.
Proposal for Regulation (2008) Article 9 and Annex I, Section E, p. 9.
- 64.
Ibid. Article 9 (2), p. 9.
- 65.
Ibid. Article 10 and Annex I, Section E, Part III, p. 9.
- 66.
Ibid. Articles 5–7 and Annex I, Section B, Points 7–9.
- 67.
Regulation (2009), p. 5.
- 68.
Ibid.
- 69.
Ibid.
- 70.
Ibid.
- 71.
In accordance with Directive 2006/48/EC.
- 72.
Regulation (2009), p. 5.
- 73.
Ibid.
- 74.
Ibid.
- 75.
In accordance with Directive 95/46/EC of the European Parliament and of the Council (of 24 October 1995) Regulation (2009), p. 5.
- 76.
OJ L 281 (23.11.1995), p. 31.
- 77.
Regulation (2009), p. 7.
- 78.
Ibid.
- 79.
Ibid.
- 80.
Ibid.
- 81.
Proposal for Regulation (2006), Article 16.
- 82.
Regulation (2009), p. 7.
- 83.
EC, Public Consultation of CRAs (5/11/2010), p. 24.
- 84.
Ibid.
- 85.
Tan (1995), pp. 113–135.
- 86.
European Union, The Council of European Parliament, “Regulation of The European Parliament and of the Council amending Regulation (EC) No 1060/2009 on credit rating agencies” (22 April 2013), p. 11, http://register.consilium.europa.eu/pdf/en/12/pe00/pe00070.en12.pdf.
- 87.
Ball et al. (2015), p. 1.
- 88.
European Union, The Council… (2013), p. 12.
- 89.
Milken Institute (2012), p. 5.
- 90.
Ibid., p. 6.
- 91.
- 92.
“Regulation (EU) No …/2013 of the European Parliament and of the Council of Amending Regulation (EC) No 1060/2009 on credit rating agencies”. http://register.consilium.europa.eu/doc/srv?l=EN&f=PE%2070%202012%20INIT.
- 93.
Flood (2005), pp. 154 and 160–171.
- 94.
Hill (2004), pp. 43 and 53.
- 95.
Committee on Global Financial System (2008), p. 9.
- 96.
Council of the European Union (2013), p. 2.
- 97.
Council of European Union (2008), p. 2.
- 98.
Regulation (2009), p. 2.
- 99.
Gavras (2012).
- 100.
US Investors’ Working Group (2009), p. 2.
- 101.
Ibid.
- 102.
Ibid., p. 3.
- 103.
Final Report of the National Commission on the Causes of the Financial and Economic Crisis (January 2011), p. xxv, http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf.
- 104.
Cane et al. (2012), p. 1122.
- 105.
European Commission, Press Release, Commission wants better quality credit ratings (15/11/2011). http://eropa.eu/rapid/pressreleaseaction.do?/reference=ip/11/1355.1.
- 106.
Regulation (2009), p. 2.
- 107.
Proposal for a Regulation (2008), p. 3.
- 108.
See Chap. 4.
- 109.
This was mentioned in the Proposal for a Regulation (2008), p. 3.
- 110.
See Chap. 6.
- 111.
See Chap. 3.
- 112.
Proposal for a Regulation (2008), p. 5.
- 113.
Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, OJ L 302 (17.11.2009). Regulation (EC) No 1060/2009 is often referred to as CRAI Regulation.
- 114.
Regulation (EU) No 513/2011 of the European Parliament and of the Council of 11 May 2011 amending Regulation (EC) No 1060/2009. Regulation (EU) No 513/2011 is often referred to as CRAII Regulation. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:145:0030:0056:EN:PDF.
- 115.
European Commission, Press Release, Commission wants better quality credit ratings (15/11/2011). http://eropa.eu/rapid/pressreleaseaction.do?/reference=ip/11/1355.
- 116.
Ibid.
- 117.
Ibid.
- 118.
Ibid.
- 119.
Ibid.
- 120.
Ibid.
- 121.
Ibid. Para 1.
- 122.
EC Press Release (2011), no. 2.
- 123.
Mahabir and Stuckey (2011).
- 124.
See Arezki et al. (2011).
- 125.
Andenaes (2012), pp. 302–304.
- 126.
Stuwe et al. (2012).
- 127.
See “Consumer protection in the European Union: Ten Basic Principles”, p. 6. http://ec.europa.eu/consumers/cons_info/10principles/en.pdf.
- 128.
Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91.
- 129.
See, for example, Council Directive 2000/43 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin; and Council Directive 2000/78 establishing a general framework for equal treatment in employment and occupation. See Glossary for the meaning of “Burden of Proof”.
- 130.
See for example, Handels-og Kontorfunktionaerernes Forbund i Danmark v. Dansk Arbejdsgiverforening (acting for Danfoss), Case 109/88, [1989] ECR 3199; Enderby v. Frenchay Area Health Authority, Case 127/92 [1993] ECR 5535. The rule was codified in Council Directive 97/80/EC on the burden of proof in cases of discrimination based on sex (Article 4(1)).
- 131.
Froymovich (2012).
- 132.
Ibid.
- 133.
“Fitch Ratings” Comments on European Commission’s Proposal (15 November 2011) for Further Amendments to the Credit Rating Agency Regulation, http://www.fitchratings.com/web_content/credit_policy/reg_affairs/Fitch_CRA3_Jan2012_vFINAL.pdf.
- 134.
Blackrock, View Point, “Reform of Credit Rating Agency Regulation in Europe: An End-investor Perspective” (April 2012), p. 3. http://www.blackrock.com/corporate/en-gb/literature/whitepaper/credit-rating-agency-end-investor-perspective-apr-2012.pdf.
- 135.
Stated by Wishart (2012).
- 136.
Ibid.
- 137.
Ibid.
- 138.
Regulation (EU) No 462/2013, amending the Regulation (EC) No 1060/2009 on credit rating agencies, the 2nd Reform Regulation. The 2nd Reform Regulation has introduced a civil liability regime for credit rating agencies at the level of European Union law.
- 139.
See also Haar (2013), p. 4.
- 140.
Minister of Finance, Republic of South Africa, Credit Rating Service Bill (7 February 2012) Secs. 19 (1), (2) and (3).
- 141.
Gracia and Del Pozo (2012), p. 257.
- 142.
Ibid., p. 4.
- 143.
Europa Press Release (2009).
- 144.
Staikouras (2012), p. 71.
- 145.
The Capital Requirements Directive/Capital Requirements Regulation which came into force on 1 January 2014. http://ec.europa.eu/internal_market/rating-agencies/docs/140512-fsb-eu-response_en.pdf.
- 146.
I Proposal for a Regulation (2008), p. 7. bid.
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Hemraj, M. (2015). EU Statutory Regulation. In: Credit Rating Agencies. Springer, Cham. https://doi.org/10.1007/978-3-319-17927-8_5
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