13 Financial services
| (31697)
10827/10
+ ADDs 1-2
COM(10) 289
| Draft Regulation on amending Regulation (EC) No. 1060/2009 on credit rating agencies
|
| Legal base | Article 114 TFEU; co-decision; QMV
|
| Department | HM Treasury
|
| Basis of consideration | Minister's letter of 19 October 2010
|
| Previous Committee Report | HC 428-i (2010-11), chapter 16 (8 September 2010) and HC 428-v (2010-11), chapter 6 (27 October 2010)
|
| To be discussed in Council | Not known
|
| Committee's assessment | Legally and politically important
|
| Committee's decision | Cleared
|
Background
13.1 The Credit Rating Agency Regulation, Regulation (EC)
No 1060/2009, which came into force on 7 December 2009, established
an EU wide regulatory regime for such agencies. Amongst other
matters the Regulation:
- stated, in a recital, that the current supervisory architecture
should not be considered as the long-term solution for the oversight
of credit rating agencies; and
- requested the Commission to put forward by 1
July 2010 a report on supervisory and regulatory reform and any
legislative proposal needed to tackle the shortcomings identified
as regards supervisory coordination and cooperation arrangements.[28]
13.2 In September and October 2009 the Commission
proposed legislation in relation to the new relevant supervisory
authority, the European Securities and Markets Authority, and
its role in relation to credit rating agencies.[29]
13.3 In June 2010 the Commission proposed this
draft amending Regulation in order to introduce centralised oversight
of credit rating agencies. It would provide for:
- the European Securities and
Markets Authority to assume general competence in matters relating
to the registration and on-going supervision of registered credit
rating agencies, as well as matters related to the endorsement
of ratings issued by rating agencies established in third countries,
or the certification of such agencies;
- national competent authorities (the Financial
Services Authority in the UK), which currently perform these functions,
to retain some specific supervisory powers;
- replacement, throughout the present Regulation,
of any reference to competent authorities in charge of the registration
and supervision of credit rating agencies by a reference to the
European Securities and Markets Authority;
- powers for the European Securities and Markets
Authority to request information, to launch investigations and
to perform on-site inspections;
- alignment of the current Regulation with the
proposals for the Alternative Investment Fund Managers Directive,[30]
with the objective of treating alternative investment funds in
the same way as other EU financial institutions with regard to
the use of credit ratings — meaning that the credit ratings
used for regulatory purposes by alternative investment fund managers,
including hedge fund managers and private equity managers, must
be issued or endorsed by a credit rating agency registered under
the Regulation, or issued by an agency certified under the Regulation;
and
- the issuer of a structured finance instrument,
such as a credit institution or investment firm, to give access,
upon request, to the information necessary for rating the structured
finance instrument — so providing all other registered or
certified credit rating agencies with access to the information
they need to issue their own unsolicited ratings of the instrument,
the Commission's intention being a more competitive ratings environment
and a better deal for the investor who will be able to rely on
more than one rating for the same instrument.
13.4 When we considered this proposal, in September
2010, we said that how the introduction of centralised oversight
of credit rating agencies is to be arranged is important but we
noted the Government's cautious approach to the proposal and its
planned consultations with a stakeholder group. So, before considering
the document further we asked to hear about, amongst other things,
the Government's further thoughts about the scope of the European
Securities and Markets Authority's powers in the draft amending
Regulation, in relation to doubts over the legality of delegating
broad executive powers to the European Supervision Authorities.
In October 2010 we heard information about other matters we had
raised. But on the legality issue we observed that, although the
Government had spelt out its view of the legal issue, it had not
actually told us to what extent it had been able to subject such
delegation to a tight legal framework nor whether it believed
that the latest text of the proposal dispelled the doubts about
legality. We asked for clarification. Meanwhile the document remained
under scrutiny.[31]
The Minister's letter
13.5 The Financial Secretary to the Treasury
(Mr Mark Hoban) now says:
- the issue of the legality of
delegating discretionary powers to the European Securities and
Markets Authority is of vital importance and has been a priority
for the Government throughout the negotiations;
- from the very beginning it has sought to
ensure that any powers conferred on Authority are subject to a
tight legal framework and significant progress has now been made
in this regard;
- for example, a new article has been added to
the Council text expressly constraining the Authority's power
to obtain information, conduct investigations and carry out inspections;
and
- the Government will continue to press this issue
as strongly as possible and work with the Commission, Presidency
and other Member States to secure a final text which confers only
those powers that may lawfully be conferred on the European Securities
and Markets Authority.
Conclusion
13.6 We are grateful to the Minister for this
clarification. We have no further questions to raise and clear
the document.
28 (30168) 15661/08: see HC 19-ii (2008-09), chapter
1 (17 December 2008) and Gen Co Debs, European Committee
B, 27 January 2009, cols 3-24. Back
29
(30954) 13654/09 (30955) 13656/09 (30956) 13657/09 (30957) 13658/09
and (31088) 15093/09: see HC 19-xxviii (2008-09), chapter 6 (21
October 2009), HC 19-xxx (2008-09), chapter 2 (4 November 2009,
HC 5-i (2009-10), chapters 1 and 2 (19 November 2009 and HC
Deb, 1 December 2009, cols 989-1030. Back
30
(30624) 9494/09 + ADDs 1-2 and (31089) 15162/09: see HC 19-xviii
(2008-09), chapter 9 (3 June 2009), HC 19-xxii (2008-09), chapter
3 (1 July 2009), HC 5-vi (2009-10), chapter 2 (13 January 2010)
and Gen Co Debs, European Committee B, 23 February 2010,
cols. 3-28. Back
31
See headnote. Back
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