“The remedial action plans ESMA has put in place require the CRAs to: incorporate all relevant factors, models, assumptions and criteria in their methodologies; improve public disclosure of the methodologies; maintain adequate records with reference to analytical specifications of rating instruments; develop proper procedures relating to changes in methodologies; improve the internal review process of performance of the methodologies; and ensure minimum standards of information quality and timeliness.”
The original regulations on CRAs passed in 2009 by the European Parliament and the Council of the European Union notes: “Credit rating agencies are considered to have failed, first, to reflect early enough in their credit ratings the worsening market conditions, and second, to adjust their credit ratings in time following the deepening market crisis.”
Nyree Stewart is deputy features editor at Investment Adviser
