92 Amendments of Sharon BOWLES related to 2008/0217(COD)
Amendment 36 #
Proposal for a regulation
Annex I – Section A – point 2 –paragraph 5
Annex I – Section A – point 2 –paragraph 5
In addition to the overall responsibility of the board, the independent members of administrative or supervisory board shall have the specific task of monitoring the development of the credit rating policy, the effectiveness of the internal quality control system of the credit rating agency on the credit rating process to ensure that there are no conflicts of interest and the compliance and governance processes including the efficiency of the review function referred to in point 7 of this Section. Opinions of the independent directorspersons providing the independent monitoring function issued on these matters shall be presented to the board periodically and made available to the competent authority, whenever the latter requests it. In the event of any disagreement between the board members in relation to the report, the report and the nature of the disagreement shall be notified to the competent authority.
Amendment 92 #
Proposal for a regulation
Recital 1
Recital 1
(1) Credit rating agencies play an important role in global securities and banking markets, as their ratings are used by investors, borrowers, issuers and governments toas part of makeing informed investment and financing decisions. Credit institutions, investments firms, insurance undertakings, assurance undertakings, reinsurance undertakings, undertakings for collective investment in transferable securities (UCITS) and institutions for occupational retirement provision, may use those ratings as the reference for the calculation of their capital requirements for solvency purposes or for calculating risks in their investment activity. Consequently, credit ratings have a significant impact on the trust and confidence of investors and consumers. It is essential, therefore, that credit ratings used in the Community are independent, objective and of the highest quality.
Amendment 97 #
Proposal for a regulation
Recital 2
Recital 2
(2) Currently, most credit rating agencies have their headquarters outside the Community. Most Member States do not regulate the activities of credit rating agencies or the conditions for the issuance of credit ratings. Despite their significant importance for the functioning of the financial markets, credit rating agencies are only to a limited extent subject to Community legislation only in limited areas, notably Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation. Moreover, 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 and Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions refer to credit rating agencies. It is therefore important to lay down rules ensuring that all ratings used by financial institutions governed by Community legislation are of high quality and issued by credit rating agencies subject to stringent requirements. The Commission will continue to work with its international partners to ensure convergence of the rules applying to credit rating agencies.
Amendment 109 #
Proposal for a regulation
Recital 5
Recital 5
(5) Credit rating agencies are considered to have failed to reflect early enough in their credit ratings the worsening market conditions in sub-prime related securitisations. This failure can be best corrected by measures related to conflicts of interest, the quality of the credit ratings, the transparency of the credit rating agencies, their internal governance and surveillance of the activities of the credit rating agencies. The users of credit ratings should not rely blindly on credit ratings. They should take utmost care to perform own analysis and conduct due diligence regarding their reliance on such credit ratings.
Amendment 117 #
Proposal for a regulation
Recital 6
Recital 6
(6) It is necessary to lay down a common framework of rules regardimproving the quality of credit ratings to be used by financial institutions regulated by harmonised rules in the Community. Otherwise, there would be a risk that Member States would take diverging measures at national level. This would have a direct negative impact on and create obstacles to the good functioning of the internal market, since the credit rating agencies issuing credit ratings for the use of financial institutions in the Community, would be subject to different rules in different Member States. Moreover, diverging quality requirements on credit ratings could lead to different levels of investor and consumer protection.
Amendment 119 #
Proposal for a regulation
Recital 6 a (new)
Recital 6 a (new)
Amendment 134 #
Proposal for a regulation
Recital 7
Recital 7
(7) In order to avoid potential conflicts of interest credit rating agencies should limit their activity as regards the rated entity to the issuing of credit ratings. A credit rating agency should not be allowed to carry out consultancy or advisory services to the rated entity. In particular credit rating agencyies should not make proposals or recommendations regarding the design of a structured finance instrument. However, credit rating agencies should be able to provide ancillary serviceservices other than the issuance of credit ratings where this does not create potential conflicts of interest with the issuance of credit ratings.
Amendment 137 #
Proposal for a regulation
Recital 8
Recital 8
(8) Credit rating agencies should establish appropriate internal policies and procedures in relation to employees involved in the credit rating process and in any outsourcing of an activity having a significant role in the rating analysis in order to prevent conflicts of interest and ensure at all times the quality, integrity and thoroughness of the rating and review process.
Amendment 138 #
Proposal for a regulation
Recital 10
Recital 10
Amendment 140 #
Proposal for a regulation
Recital 10
Recital 10
(10) In order to ensure the independence of the credit rating process from the business interest of the credit rating agency as a company, the credit rating agencies should ensure that the administrative or supervisory board shall include at least three nonexecutive members, who should be independent along the lines of point 13 in Section III of Commission Recommendation 2005/162/EC on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board. Moreover, it is necessary that the majority ofis independent when monitoring and reporting on proper compliance with this Regulation with regard to the maintenance of the independence and quality of credit ratings. Moreover, members of the administrative or supervisory board, including all independent members should have sufficient expertise in appropriate areas of financial services.
Amendment 143 #
Proposal for a regulation
Recital 11
Recital 11
(11) In order to avoid conflicts of interest the remuneration of independentthe members of the administrative or supervisory board should not depend on the business performance of the agency.
Amendment 150 #
Proposal for a regulation
Recital 13
Recital 13
(13) Long lasting relationships with the same rated entities or its related third parties could compromise independence of lead analysts and persons approving credit ratings. Therefore those analysts and persons should be subject to a rotation mechanism.
Amendment 162 #
Proposal for a regulation
Recital 14
Recital 14
(14) Credit rating agencies should use rating methodologies that are rigorous, systematic, and continuous and result in ratings that may be subject to validation based onincluding by appropriate historical experience. Credit rating agencies should ensure that methodologies, models and key ratingmathematical, correlation and other assumptions used for determining credit ratings are properly maintained, up-to-date and subject to a comprehensive review on a periodic basis and descriptions are published in a manner so as to permit academic review. In cases where the lack of reliable data or the complexity of the structure of a new type, in particular structured finance instruments, raises serious questions as to whether the credit rating agency can produce a credible credit rating, the credit rating agency should refrain from issuing a credit rating or withdraw an existing credit. Changes in the quality of information available for monitoring an existing rating shall be publicised with that review and, if appropriate, a revision of the rating made.
Amendment 163 #
Proposal for a regulation
Recital 14
Recital 14
(14) Credit rating agencies should use rating methodologies that are rigorous, systematic, and continuous and result in ratings that may be subject to validation based on historical experience. Credit rating agencies should ensure that methodologies, models and key rating assumptions used for determining credit ratings are properly maintained, up-to-date and subject to a comprehensive review on a periodic basis. In cases where the lack of reliable data or the complexity of the structure of a new type, in particular structured finance instruments, raises serious questions as to whether the credit rating agency can produce a credible credit rating, the credit rating agency should refrain from issuing a credit rating or withdraw an existingnew credit rating.
Amendment 167 #
Proposal for a regulation
Recital 14 a (new)
Recital 14 a (new)
(14a) Issuers shall make available information provided to credit rating agencies to those who request it for the purpose of independent analysis. Recipients of such information shall agree in advance neither to relay it to the public nor to trade in the relevant securities.
Amendment 168 #
Proposal for a regulation
Recital 15
Recital 15
(15) In order to ensure the quality of the ratings procedure, a credit rating agency should take reasonable measures to ensure that the information it uses in assigning a rating is reliable. For this purpose, aA credit rating agency may envisage, among other elements reliance on independently audited financial statements and public disclosures; verification by reputable third party services; random sampling examination by the credit rating agency of the information received; or contractual provisions clearly stipulating liability for the rated entity or its related third parties, if the information provided under the contract is knowingly materially false or misleading or if the rated entity or its related third parties fail to conduct reasonable due diligence regarding the accuracy of the information as specified under the terms of the contractis not an auditor of data and due diligence by issuers and third parties, but must have in place appropriate and transparent procedures for assessing the quality of data and that the sources that it relies upon justify that trust, e.g. by way of professional independence or reputation. For this purpose, a credit rating agency may envisage, among other elements reliance on independently audited financial statements and public disclosures; verification by reputable third party services; random sampling examination by the credit rating agency of the information received.
Amendment 170 #
Proposal for a regulation
Recital 16
Recital 16
(16) It is necessary that credit rating agencies establish proper procedures for the regular review of methodologies, models and key rating assumptions used by the credit rating agency are regularly reviewed in order to be able to properly reflect the changing conditions in the underlying asset markets. With a view to ensuring transparency, disclosure of any material modification to the methodologies and practices, procedures and processes of credit rating agency should be made prior to their coming into effect, unless extreme market conditions require an immediate change in the credit rating.
Amendment 172 #
Proposal for a regulation
Recital 18
Recital 18
(18) Under certain circumstances structured finance instruments may have effects which are different from traditional corporate debt instruments. It could be misleading for investors to apply the same rating categories to both types of instruments without further explanation. Credit rating agencies should play an important role in raising awareness of the users of ratings about the specificities of the structured finance products in relation to traditional ones. Therefore credit rating agencies should either use different rating categories when rating structured finance instruments, for example by carrying a supplemental annotation, or provide additional information on the different risk characteristics of these products.
Amendment 173 #
Proposal for a regulation
Recital 19
Recital 19
Amendment 198 #
Proposal for a regulation
Recital 28
Recital 28
(28) It is appropriate to create a mechanism to ensure the effective enforcement of the provisions of this Regulation. The competent authorities of the Member States should have at their disposal necessary means to ensure that ratings for use within the Community are issued in compliance with this Regulation. Since the analytical independence of a credit rating agency in the process of issuing its credit ratings should be preserved, neither the competent authorities nor Member States should not interfere in relation to the substance of credit ratings and the methodologies by which a credit rating agency determines credit ratings. In the event that a credit rating agency is subjected to inappropriate pressure it should notify the Commission and the CESR.
Amendment 204 #
Proposal for a regulation
Recital 30
Recital 30
(30) In case the competent authority of the home Member State does not take the necessary measures in order to eliminate irregularities committed by a credit rating agency, competent authorities of other Member States should be able to intervene and take appropriate measures. Such interventions should be coordinated by the CESR. In appropriate circumstances the CESR should be able to recommend that joint investigations take place involving the competent authorities of the other Member States and the CESR.
Amendment 205 #
Proposal for a regulation
Recital 32
Recital 32
(32) CESR should ensure coherence in the application of this Regulation. It should enhance and facilitate the cooperation of competent authorities in supervisory activities and assume a coordination role in day-to-day supervisory practice. Therefore CESR should establish a mediation mechanism and peer review in order to facilitate a coherent approach by the competent authorities.
Amendment 209 #
Proposal for a regulation
Recital 35
Recital 35
(35) The stricter and clearer legal framework within which credit rating agencies will operate should also facilitate recourse to civil actions in respect of credit rating agencies in appropriate cases, in accordance with the applicable regimes of liability of the Member StatesAn infringement of the provisions of this Regulation should not give rise to any claim for damages by third-party litigants per se. It should be possible to make such a claim only in accordance with the applicable national law for civil liability.
Amendment 213 #
Proposal for a regulation
Recital 37
Recital 37
(37) In particular the Commission should be empowered to amend Annex I and II of the Regulation which lay down the specific criteria for assessing the compliance of a credit rating agency with its duties in terms of internal organisation, operational arrangements, rules on employees, presentation of credit ratings and disclosure. Since those measures are of general scope and are designed to amend non-essential elements of this Regulation, they must be adopted in accordance with the regulatory procedure with scrutiny provided for in Article 5a of Decision 1999/468/EC. In proposing amendments, the Commission should take account of international developments.
Amendment 221 #
Proposal for a regulation
Article 2 – paragraph 1
Article 2 – paragraph 1
1. This Regulation shall applyies to credit ratings that are intended for use for regulatory purposes or otherwise by credit institutions as defined in Directive 2006/48/EC, investments firms as defined in Directive 2004/39/EC of the European Parliament and of the Council, insurance undertakings subject to Council Directive 73/239/EEC, assurance undertakings as defined in Directive 2002/83/EC of the European Parliament and of the Council, reinsurance undertakings as defined in Directive 2005/68/EC of the European Parliament and the Council34, undertakings for collective investment in transferable securities (UCITS) as defined in Directive [2009/XX/EC] or institutions for occupational retirement provision as defined in Directive 2003/41/EC of the European Parliament and of the Council36 and are disclosed publicly or distributed by subscription.
Amendment 226 #
Proposal for a regulation
Article 2 – paragraph 2
Article 2 – paragraph 2
2. This Regulation shalldoes not apply to private credit ratings. It shall not apply to credit ratings issued by public bodies whose credit ratings are not publicly disclosed and are not, used for regulatory purposes, or paid by the rated entity.
Amendment 230 #
Proposal for a regulation
Article 3 – paragraph 1 – point d a (new)
Article 3 – paragraph 1 – point d a (new)
(da) 'lead analyst' means a person with primary responsibility for communicating with the issuer with respect to a particular credit rating and, where relevant, preparing the recommendation to the rating committee;
Amendment 231 #
Proposal for a regulation
Article 3 – paragraph 1 – point e a (new)
Article 3 – paragraph 1 – point e a (new)
(ea) 'regulatory purposes' means the use of credit ratings for the specific purpose of complying with any provision of Community law, as implemented by the national legislation of the Member States, that permits any person to use a credit rating for a specified purpose;
Amendment 233 #
Proposal for a regulation
Article 3 – paragraph 1 – point h a (new)
Article 3 – paragraph 1 – point h a (new)
(ha) 'facilitator' means the competent authority of the credit rating agency home Member State;
Amendment 236 #
Proposal for a regulation
Article 4 – paragraph 1
Article 4 – paragraph 1
Credit institutions, investments firms, insurance, assurance and reinsurance undertakings, undertakings for collective investment in transferable securities (UCITS) and institutions for occupational retirement provision referred to in Article 2 may only use for regulatory purposes credit ratings which are issued by or with credit rating agencies established in the Community and registered in accordance with this Regulation, or by rating agencies in countries with an established co- operation regime.
Amendment 241 #
Proposal for a regulation
Article 4 – paragraph 2
Article 4 – paragraph 2
Amendment 269 #
Proposal for a regulation
Article 6 – paragraph 4 – subparagraph 1
Article 6 – paragraph 4 – subparagraph 1
4. A credit rating agency shall ensure that lead analysts and persons approving credit ratings shall not be involved in providing the credit rating services to the same rated entity or its related third parties for a period exceeding fourive years. For that purpose it shall establish a rotation mechanism with regard to those analysts and persons. In special circumstances based on guidance to be issued by the CESR, credit rating agencies may request the relevant competent authority to vary or waive the rotation requirement. Any proposal to allow such variation will be notified to CESR and made public.
Amendment 271 #
Proposal for a regulation
Article 6 – paragraph 4 - subparagraph 1
Article 6 – paragraph 4 - subparagraph 1
4. A credit rating agency shall ensure that analysts and persons approvpreparing credit ratings shall not be involved in providing the credit rating services to the same rated entity or its related third parties for a period exceeding fourive years. For that purpose it shall establish a rotation mechanism with regard to those analysts and persons.
Amendment 279 #
Proposal for a regulation
Article 6 – paragraph 4 - subparagraph 2
Article 6 – paragraph 4 - subparagraph 2
Amendment 281 #
Proposal for a regulation
Article 6 – paragraph 4 - subparagraph 2
Article 6 – paragraph 4 - subparagraph 2
The period after which thelead analysts and persons approving credit ratings maymay again be involved in providing the credit rating services to the rated entity or related third parties referred to in the first subparagraph may not beshall be no shorter than two years.
Amendment 287 #
Proposal for a regulation
Article 6 – paragraph 6
Article 6 – paragraph 6
6. Compensation and performance evaluation of analysts and persons approvingof influence on the credit ratings shall not be specifically contingent on the amount of revenue that the credit rating agency derives from the rated entities or related third parties to which the analyst or persons approving the credit ratings provide services.
Amendment 291 #
Proposal for a regulation
Article 7 – paragraph 2
Article 7 – paragraph 2
2. A credit rating agency shall ensure that the credit ratings it produces and disseminates are based on an analysis of all information available to it that is of relevance according to its rating methodologies. It shall adopt all necessary and appropriate measures so that the information it uses in assigning a credit rating is of sufficient quality and from reliable sources.
Amendment 295 #
Proposal for a regulation
Article 7 – paragraph 3 – subparagraph 2
Article 7 – paragraph 3 – subparagraph 2
A credit rating agency shall record and make public all instances where in its credit rating process it downgrades existing credit ratings prepared by another credit rating agency with respect to underlying assets or structured finance instruments providing a justification for the downgrade.
Amendment 297 #
Proposal for a regulation
Article 7 – paragraph 4
Article 7 – paragraph 4
4. A credit rating agency shall monitor credit ratings and review its credit ratings where necessaryon an ongoing basis. A credit rating agency shall establish internal arrangements to monitor the impact of changes in macroeconomic or financial market conditions on credit ratings; it shall issue a warning in the event of general adverse and extreme market conditions.
Amendment 309 #
Proposal for a regulation
Article 8 – paragraph 3 – point a
Article 8 – paragraph 3 – point a
(a) credit rating categories that may be attributed to structured finance instruments are clearly differentiated from rating categories that may be used to rate other types of rated entities or financial instruments for example by carrying a supplemental annotation;
Amendment 312 #
Proposal for a regulation
Article 8 – paragraph 5 – subparagraph 2
Article 8 – paragraph 5 – subparagraph 2
Unsolicited credit ratings shallmay be identified with a different credit rating categoryn annotation.
Amendment 314 #
Proposal for a regulation
Article 8 a (new)
Article 8 a (new)
Amendment 315 #
Proposal for a regulation
Article 9 – paragraph 2
Article 9 – paragraph 2
2. CRegistered credit rating agencies shall make available in a central repository established by CESR information on their historical performance data and information about past credit rating activities. The repository shall be open to the publicCESR shall provide guidance on the format, detail and period that is to be covered. The CESR shall make available to the public the information on historical performance and past credit rating activities in an appropriate form.
Amendment 321 #
Proposal for a regulation
Article 10
Article 10
A credit rating agency shall publish annually a transparency report which includes the information on matters set out in Annex I, Section E, Part III. The credit rating agency shall publish its annual report at the latest three months after the end of each financial year and shall ensure that it remains available on the website of the agency for at least five years. Those publications and websites may be on a group basis and need not be exclusively related to Europe.
Amendment 323 #
Proposal for a regulation
Article 12 – paragraph 1
Article 12 – paragraph 1
1. A credit rating agency or a group of credit rating agencies may apply for registration in order to ensure that its credit ratings can be used for regulatory purposes by credit institutions, investments firms, insurance, assurance and reinsurance undertakings, undertakings for collective investment in transferable securities (UCITS) and institutions for occupational retirement provision referred to in Article 2 provided that it is a legal person established in the Community.
Amendment 345 #
Proposal for a regulation
Article 18 – paragraph 1 a (new)
Article 18 – paragraph 1 a (new)
1a. The CESR shall work closely together with the Committee of European Banking Supervisors (CEBS) established by Commission Decision 2004/5/EC of 5 November 20031 and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) established by Commission Decision 2004/6/EC of 5 November 20032, in view of the role of credit rating agencies and credit ratings in the context of capital and solvency requirements. This applies, in particular, to circumstances or recommendations for instances of withdrawal of registration of a credit rating agency. 1 OJ L 3, 7.1.2004, p. 28. 2 OJ L 3, 7.1.2004, p. 30.
Amendment 346 #
Proposal for a regulation
Article 18 – paragraph 2 – introductory part
Article 18 – paragraph 2 – introductory part
2. By [within one year...* the CESR shall issue guidance on: * OJ please insert date: 6 months after entry into force of this Regulation] CESR shall issue guidance on: .
Amendment 347 #
Proposal for a regulation
Article 18 – paragraph 3
Article 18 – paragraph 3
3. CESR shall publish by [within one...* and every year thereafter entry into force of this Regulation] and every year thereafter a report on the applicationa report on the application of this Regulation. * OJ please insert date: 18 months after entry into force of this Regulation.
Amendment 348 #
Proposal for a regulation
Article 18 – paragraph 4
Article 18 – paragraph 4
Amendment 351 #
Proposal for a regulation
Article 19 – paragraph 2
Article 19 – paragraph 2
2. Competent authorities shall be adequately staffedstaffed in sufficient capacity and expertise in order to be able to apply this Regulation.
Amendment 353 #
Proposal for a regulation
Article 20 – paragraph 1
Article 20 – paragraph 1
1. In carrying out their duties under this Regulation neither competent authorities of Member States nor Member States shall not interfere with the content of credit ratings or the methodologies by which a credit rating agency determines credit ratings.
Amendment 355 #
Proposal for a regulation
Article 21 – paragraph 1 – introductory part
Article 21 – paragraph 1 – introductory part
1. The competent authority of the home Member State may take the following measures in the event of a breach of this Regulation:
Amendment 356 #
Proposal for a regulation
Article 21 – paragraph 1 – point b
Article 21 – paragraph 1 – point b
(b) impose temporary prohibition of issuing new credit ratings with effect throughout the Community;
Amendment 357 #
Proposal for a regulation
Article 21 – paragraph 1 – point c
Article 21 – paragraph 1 – point c
Amendment 358 #
Proposal for a regulation
Article 21 – paragraph 1 – subparagraph 1 a (new)
Article 21 – paragraph 1 – subparagraph 1 a (new)
Credit rating agencies should be given notice to rectify errors before implementing sanctions under points a, b or c.
Amendment 359 #
Proposal for a regulation
Article 21 – paragraph 2 – subparagraph 1
Article 21 – paragraph 2 – subparagraph 1
2. Competent authorities shall not make use of the powers provided for in paragraph 1 and Article 22 before communicating a motivated draft decision to CESR and to the credit rating agency. CESR shall express its views on the draft decision within 15 days of receipt of that communication.
Amendment 360 #
Proposal for a regulation
Article 21 – paragraph 2 – subparagraph 2 a (new)
Article 21 – paragraph 2 – subparagraph 2 a (new)
In the interests of investors and market stability competent authorities shall take all possible measures to ensure the review and, where appropriate, the re-issue of ratings.
Amendment 361 #
Proposal for a regulation
Article 22 – paragraph 1
Article 22 – paragraph 1
Where the competent authority of a Member State has grounds for believing that a registered credit rating agency acting within its territory is in breach of the obligations arising from this Regulation, it shall inform the competent authority of the home Member State and CESR.
Amendment 362 #
Proposal for a regulation
Article 22 – paragraph 2
Article 22 – paragraph 2
If, after discussions between the competent authorities concerned, the competent authority of the home Member State refuses to act or is unable to adopt effective measures or if, despite the measures taken by the competent authority of the home Member State such measures prove inadequate to protect the interests of the investors of the Member State concernedrectify breaches orf the orderly functioning of marketsRegulation, the competent authority of that Member State, after informing the competent authority of the home Member State may take all appropriate measures except for the measures referred to in point (a), (b) and (c) of Article 21(1). CESR shall be consulted before the adoption of such measures. and may coordinate further investigations
Amendment 381 #
Proposal for a regulation
Article 27 – paragraph 2
Article 27 – paragraph 2
2. In case of disagreement between competent authorities of Member States on an assessment or action under this Regulation, competent authorities shall refer the matter to CESR for mediation and, where appropriate, for the coordination of further investigation. The competent authorities shall take into account the opinion of CESR.
Amendment 385 #
Proposal for a regulation
Article 28 – paragraph 1
Article 28 – paragraph 1
1. The obligation of professional secrecy shall apply to all persons who work or who have worked for the competent authority, the CESR or for any authority or person to whom the competent authority has delegated tasks, including auditors and experts contracted by the competent authority. Information covered by professional secrecy may not be disclosed to any other person or authority except when such disclosure is necessary for legal proceedings.
Amendment 386 #
Article 28 a (new)
Amendment 390 #
Article 31 – paragraph 1
Member States shall lay down the rules on penalties applicable to infringements of the provisions of this Regulation and shall take all measures necessary to ensure that they are implemented. Penalties shall, at least, cover cases of gross professional misconduct and lack of due diligenceproper care and attention in the rating procedures. The penalties provided for must be effective, proportionate and dissuasive.
Amendment 391 #
Article 31 – paragraph 1 a (new)
An infringement of the provisions of this Regulation does not of itself give any right of action for damages by third-party litigants and such claims may be made only in accordance with the applicable national law for civil liability.
Amendment 395 #
Article 32 – paragraph 1
The Commission may amend the Annexes in order to take account of developments on financial markets, in particular in relation to new financial instruments and with regard to convergence of supervisory practice. In proposing amendments the Commission should take account of international developments.
Amendment 399 #
Article 35 – paragraph 1
Credit rating agencies operating in the Community before [the date of entry into force of this Regulation]...* shall adopt all necessary measures to comply with this Regulation and shall submit an application for registration by [six...*. * OJ please insert date of entry into force of this Regulation. * OJ please insert date: 12 months after the entry into force of this Regulation].
Amendment 403 #
Article 35 – paragraph 2
The credit rating agencies referred to in the first subparagraph shall cease to issue credit ratings ifmay continue issuing credit ratings for the purposes of Article 2(1). Those credit ratings may be used for regulatory purposes by financial institutions as referred to in Article 4(1) unless registration is refused.
Amendment 404 #
Article 35 – paragraph 2 a (new)
The CESR shall issue guidance concerning the effect on existing ratings and on any further transitional measures that may be required.
Amendment 411 #
Proposal for a regulation
Annex I – Section A – point 1 – introductory part
Annex I – Section A – point 1 – introductory part
1. The credit rating agency or the group of credit rating agencies shall have an administrative or supervisory board that is responsible for ensuring:
Amendment 413 #
Proposal for a regulation
Annex I – Section A – point 2 – paragraph 3
Annex I – Section A – point 2 – paragraph 3
Amendment 415 #
Proposal for a regulation
Annex I – Section A – point 2 – paragraph 3
Annex I – Section A – point 2 – paragraph 3
The administrative or supervisory board of a credit rating agency shall include at least three non-executive members who shall be are independent. The remuneration of the independent members of administrative or supervisory boardor be subject to an independent monitoring function by persons with responsibility for the monitoring and reporting on proper compliance with this regulation with regard to maintenance of the independence and quality of ratings. That function may be fulfilled by non-executive directors. The remuneration of the persons providing the independent monitoring function shall not be linked to the business performance of the credit rating agency and shall be arranged so as to ensure the independence of their judgement. The term of office of the independent members of the administrative or supervisory boardpersons providing the independent monitoring function shall be for a pre-agreed fixed period not exceeding five years and shall not be renewable once. The dismissal of independent members of the administrative or supervisory boardpersons providing the independent monitoring function shall only take place in case of misconduct or professional underperformance.
Amendment 417 #
Proposal for a regulation
Annex I – Section A – point 2 – paragraph 4
Annex I – Section A – point 2 – paragraph 4
Amendment 419 #
Proposal for a regulation
Annex I – Section A – point 2 – paragraph 4
Annex I – Section A – point 2 – paragraph 4
The majority of members of the administrative or supervisory board, including all independent members,persons providing the independent monitoring function shall have sufficient expertise in financial services. At least one independent member of this boardof the persons providing the independent monitoring function should have in-depth knowledge and, where relevant, experience at a senior level of the structured credit and securitisation markets.
Amendment 420 #
Proposal for a regulation
Annex I – Section A – point 2 – paragraph 5
Annex I – Section A – point 2 – paragraph 5
Amendment 422 #
Proposal for a regulation
Annex I – Section A – point 2 – paragraph 5
Annex I – Section A – point 2 – paragraph 5
In addition to the overall responsibility of the board, the independent members of administrative or supervisory boardpersons providing the independent monitoring function shall have the specific task of monitoring the development of the credit rating policy, the effectiveness of the internal quality control system of the credit rating agency on the credit rating process to ensure that there are no conflicts of interest and the compliance and governance processes including the efficiency of the review function referred to in point 7 of this Section. Opinions of the independent directorspersons providing the independent monitoring function issued on these matters shall be presented to the board periodically and made available to the competent authority, whenever the latter requests it.
Amendment 423 #
Proposal for a regulation
Annex I – Section A – point 2 – paragraph 5 a (new)
Annex I – Section A – point 2 – paragraph 5 a (new)
A credit rating agency shall maintain arrangements for sound corporate governance. Such arrangements may be adapted in order to take into account the size of the credit rating agency, its corporate structure, and the legislative requirements and other standards of corporate governance applicable in the jurisdictions where it is incorporated or where it has its principal place of business. In determining its corporate governance arrangements, a credit rating agency shall have regard to the need to ensure that it will provide ratings that are independent, objective and high quality.
Amendment 425 #
Proposal for a regulation
Annex I – Section A – point 5
Annex I – Section A – point 5
5. A credit rating agency shall establish appropriate and effective organisational and administrative arrangements to identify, prevent and, manage, record, and disclose conflicts of interest referred to in point 1 of Section B. It shall keep a record of aAll significant threats to its independence and that of its employees involved in the credit rating process, as well as the safeguards applied to mitigate those threats shall be recorded.
Amendment 426 #
Proposal for a regulation
Annex I – Section A – point 7 – paragraph 1
Annex I – Section A – point 7 – paragraph 1
7. A credit rating agency shall establish a review function responsible for periodically reviewing the methodologies, models and significant changes to methodologies and models it uses, as well as the appropriateness of those methodologies and modelskey mathematical, correlation and other assumptions and any significant changes or modifications to them as well as the appropriateness of those methodologies, models and assumptions in the event of their use or proposed use for the assessment of new financial instruments.
Amendment 430 #
Proposal for a regulation
Annex I – Section B – point 3 – introductory part
Annex I – Section B – point 3 – introductory part
3. A credit rating agency shall not issue a credit rating or shall, withdrawout delay, disclose its relationship with the rated entity affecting an existing credit rating in the following cases:
Amendment 431 #
Proposal for a regulation
Annex I – Section B – point 3 – point a
Annex I – Section B – point 3 – point a
(a) the credit rating agency, an analyst that participated in determining a credit rating, or person approving the credit ratings, directly or indirectly owns financial instruments of the rated entity or any related third party or has any other direct or indirect ownership interest in that entity or party; for the avoidance of doubt this does not apply in the event of de minimis events or transient, unavoidable situations (such as inheritance or testamentary bequests) or when any holding is in a diversified collective investment scheme;
Amendment 433 #
Proposal for a regulation
Annex I – Section B – point 3 – point c a (new)
Annex I – Section B – point 3 – point c a (new)
(ca) an analyst who participated in determining a credit rating, or a person approving the credit ratings, has recently been employed or had another significant business relationship with the rated entity, which may cause or may be perceived as causing a conflict of interests;
Amendment 435 #
Proposal for a regulation
Annex I – Section B – point 3 – point c b (new)
Annex I – Section B – point 3 – point c b (new)
(cb) an analyst who participated in determining a credit rating, or person approving the credit ratings, has had any other relationship with the rated entity or any related entity thereof that may cause or may be perceived as causing a conflict of interests.
Amendment 436 #
Proposal for a regulation
Annex I – Section B – point 3 – paragraph 1 a (new)
Annex I – Section B – point 3 – paragraph 1 a (new)
Where a credit rating already exists, the credit rating agency shall immediately review and, if appropriate, revise the existing credit rating in accordance with point 1.
Amendment 438 #
Proposal for a regulation
Annex I – Section B – point 7
Annex I – Section B – point 7
7. A credit rating agency shall keep records and auarrange for adequate records of its credit rating activities to be kept. Those records should include: (a) for each credit trails of all its activities, including records of agreements between the credit rating agency and the rated entity or related third party and all significant elements of the dialogue with the rated entity and its related third parties, as well as records in relation to the obligations set out in Articles 5, 6 and 7. ting decision, the identity of the credit analysts participating in determining the credit rating, the identity of the persons who have approved the credit rating, details of whether the credit rating was solicited or unsolicited and the date on which the credit rating action was taken; (b) the account records relating to fees received from any issuer, obligor, underwriter or other user; (c) account records for each subscriber to the credit ratings or related services; (d) records documenting the established procedures and methodologies used by the credit rating agency to determine ratings; (e) the internal records and files, including non-public information and work papers, used to form the basis of any credit rating decision taken; (f) credit analysis reports, credit assessment reports and private credit rating reports and internal records, including non-public information and work papers, used to form the basis of the opinions expressed in such reports; (g) records of the procedures maintained by the credit rating agency to comply with the provisions of this Regulation; and (h) copies of internal and external communications, including electronic communications, received and sent by the credit rating agency and its employees, that relate to initiating, determining, maintaining, changing or withdrawing a credit rating.
Amendment 441 #
Proposal for a regulation
Annex I – Section C – point 4
Annex I – Section C – point 4
4. An employee or other person directly involved in the credit rating process shall not solicit or accept money, gifts or favours from anyone with whom the credit rating agency does business.
Amendment 443 #
Proposal for a regulation
Annex I – Section D – part I – point 3 – paragraph 1
Annex I – Section D – part I – point 3 – paragraph 1
3. A credit rating agency shall ensure that any credit rating states clearly and prominently any attributes and limitations of the credit rating. In particular, a credit rating agency shall prominently state in any credit rating whether it considers satisfactory the quality of information available on the rated entity and to what extent it has verified information provided to it by the rated entity or its related third party. A rating agency shall not be required to audit due diligence provided to it by the rated entity. If a credit rating involves a type of entity or financial instrument for which historical data is limited, the credit rating agency shall make clear, in a prominent place, the limitations of the credit rating.
Amendment 444 #
Proposal for a regulation
Annex I – Section D – part I – point 3 – paragraph 2
Annex I – Section D – part I – point 3 – paragraph 2
In case where the lack of reliable data or the complexity of the structure of a new type of instrument or the quality of information available is not satisfactory or raises serious questions as to whether a credit rating agency can provide a credible credit rating, the credit rating agency shall refrain from issuing a credit rating or withdraw an existing rating.
Amendment 446 #
Proposal for a regulation
Annex I – Section D – part I – point 3 – paragraph 2 a (new)
Annex I – Section D – part I – point 3 – paragraph 2 a (new)
Changes in the quality of information available for monitoring an existing credit rating shall be made public and the credit rating shall be reviewed and, if appropriate, revised.
Amendment 449 #
Proposal for a regulation
Annex I – Section D – part II – point 1
Annex I – Section D – part II – point 1
1. Where a credit rating agency rates a structured finance instrument, it shall provide in the credit rating information about loss and cash-flow analysis it has performed or is relying upon.
Amendment 450 #
Proposal for a regulation
Annex I – Section D – part II – point 2
Annex I – Section D – part II – point 2
2. A credit rating agency shall state what level of assessment it has performed concerning the due diligence processes carried out by others at the level of underlying assets of structured finance instruments. The credit rating agency shall disclose whether it has undertaken any assessment of such due diligence processes or whether it has relied on a third-party assessment, indicating how the outcome of such assessment impacts the rating.
Amendment 451 #
Proposal for a regulation
Annex I – Section E – part I – point 5
Annex I – Section E – part I – point 5
5. Methodologies, models and key ratingand descriptions of models and key mathematical, correlation and other assumptions as well as their material changes;
Amendment 452 #
Proposal for a regulation
Annex I – Section E – part II – point 2
Annex I – Section E – part II – point 2