Text proposed by the Commission Amendments proposed by the ECB (1)

Amendment 1

Third citation (new)

No text. ‘Having regard to the opinion of the European Central Bank,’

Justification Since the ECB is required to be consulted on the proposed regulation under Articles 127(4) and 282(5) of the Treaty, a citation to this effect should be inserted in the proposed regulation in line with the second paragraph of Article 296 of the Treaty, according to which legal acts shall refer, inter alia, to opinions required by the Treaties.

Amendment 2

Recital 5, recitals 11a and 16a (new)

‘(5) In order to reinforce competition between credit rating agencies, to help avoiding possible conflicts of interest under the issuer-pays model, which are particularly virulent regarding the rating of structured finance instruments, and to enhance transparency and the quality of ratings for structured finance instruments, registered or certified credit rating agencies should have the right to access a list of structured finance instruments that are being rated by their competitors. The information for this rating should be provided by the issuer or a related third party for the purpose of the issuance of unsolicited competing ratings on structured finance instruments. The issuance of such unsolicited ratings should promote the use of more than one rating per structured finance instrument. Access to the websites should only be granted if a credit rating agency is able to ensure the confidentiality of the requested information.’ ‘(5) Rating of structured finance instruments may be particularly affected by conflicts of interest related to the issuer-pays model, ,. In order to address this issue, competition between credit rating agencies should be reinforced through creation of incentives to use multiple credit ratings and hence to enhance transparency and quality of the ratingprocess. Hence, registered or certified credit rating agencies should have the right to access a list of structured finance instruments that are being rated by their competitors. The information for this rating should be provided by the issuer or a related third party for the purpose of the issuance of unsolicited competing ratings on structured finance instruments. Access to the websites should only be granted if a credit rating agency is able to ensure the confidentiality of the requested information. ESMA should be mandated to monitor the implementation of such transparency arrangements and to draw up a report analysing their practical impact on the practice of issuing credit ratings and the need for any adjustments. … (11a) In order to allow effective surveillance by ESMA, credit rating agencies should make available in a central repository established by ESMA information on their historical performance data. This should be in a format which is consistent with the Union statistical framework and which facilitates direct comparisons between historical data provided by different credit rating agencies. Moreover, in order to safeguard the proper functioning of the practice of issuing unsolicited credit ratings, periodic disclosures made by credit rating agencies to ESMA should include specified information related to the issuance of such ratings. … (16a) Competent supervisory authorities, central banks of Member States, the European System of Central Banks and the European Central Bank, in their capacity as monetary authorities, the European Systemic Risk Board and, where appropriate, other Member State authorities responsible for overseeing payment and settlement systems, should have access to the information which has been collected by ESMA from credit rating agencies which is relevant for the exercise of their tasks.’

Justfication See paragraphs 5 to 8 of the opinion. These amendments are related to amendments 3 to 7.

Amendment 3

Article 1(4) of the proposed regulation

‘4. The following Articles 8a and 8b are inserted: “Article 8a Information on structured finance instruments … 2. Where other credit rating agencies registered or certified according to this Regulation request access to the information referred to in paragraph 1, they shall be granted access without delay provided that they meet all of the following conditions: (a) they have the systems and organisational structure in place to ensure the confidentiality of this information; (b) they provide ratings on a yearly basis for at least 10 % of the structured finance instruments for which they request access to information referred to in paragraph 1. …” ’ ‘4. The following Articles 8a, 8b and 8c are inserted: “Article 8a Information on structured finance instruments … 2. Where other credit rating agencies registered or certified in accordance with this Regulation request access to the information referred to in paragraph 1, they shall be granted access without delay provided that they have been granted the authorisation referred to in paragraph 2b. 2a. A credit rating agency which, in accordance with paragraph 2, accesses the information referred to in paragraph 1 for more than 10 structured finance instruments within one calendar year shall issue, within the same calendar year, credit ratings in respect of at least 10 % of the structured finance instruments in respect of which it accessed the information. 2b. ESMA shall verify on a yearly basis whether the credit rating agencies registered or certified in accordance with this Regulation comply with the following conditions: (a) having systems and organisational structures in place to ensure the confidentiality of the information referred to in paragraph 1; and (b) complying, in the previous calendar year, with the obligation specified in paragraph 2a. If the outcome of the verification is positive, ESMA shall issue an authorisation allowing access to the information referred to in paragraph 1, which shall be valid for a period of 12 months. … Article 8c Review 1. Before 1 April 2012, ESMA shall draw up a report analysing the experience acquired in connection with the application of Articles 8a and 8b. The report shall in particular address the following issues: (a) the impact of those Articles on the amount and quality of issued credit ratings, including unsolicited credit ratings; (b) any need to amend the eligibility conditions set by Article 8a(2), with a view to avoiding excessive barriers to market entry; (c) the burden imposed on issuers by Article 8a(1); and (d) any need to protect issuers against misuse of the information provided by them to a credit rating agency other than the credit rating agency that they appointed. 2. Following the submission by ESMA of the report referred to in paragraph 1, the Commission shall, if appropriate, put forward proposals to amend Articles 8a and 8b.” ’

Justification See paragraphs 5 to 6 of the opinion.

Amendment 4

Article 1(7) of the proposed regulation

‘7. In Article 11, paragraphs 2 and 3 are replaced by the following: “2. A credit rating agency shall make available in a central repository established by ESMA information on its historical performance data including the ratings transition frequency and information about credit ratings issued in the past and on their changes. A credit rating agency shall provide information to that repository on a standard form as provided for by ESMA. ESMA shall make that information accessible to the public and shall publish summary information on the main developments observed on an annual basis. ….” ’ ‘7. In Article 11, paragraphs 2 and 3 are replaced by the following: “2. A credit rating agency shall make available in a central repository established by ESMA information on its historical performance data including the ratings transition frequency and information about credit ratings issued in the past and on their changes. A credit rating agency shall provide information to that repository on a standard form, which shall be provided by ESMA in a format which is consistent with the Union statistical framework and which facilitates, through the use of common identifiers and standards, direct comparisons between historical data provided by different credit rating agencies. ESMA shall make that information accessible to the public and shall publish summary information on the main developments observed on an annual basis. …” ’

Justification See paragraph 7 of the opinion.

Amendment 5

Article 1(17) of the proposed regulation

‘17. Articles 26 and 27 are replaced by the following: “… Article 27 Exchange of information … (2) ESMA may transmit to the competent authorities responsible for supervising the undertakings referred to in Article 4(1), central banks, the European System of Central Banks and the European Central Bank, in their capacity as monetary authorities, the European Systematic Risk Board and, where appropriate, to other public authorities responsible for overseeing payment and settlement systems, confidential information intended for the performance of their tasks. Similarly, such authorities or bodies shall not be prevented from communicating to ESMA information that ESMA may need in order to carry out its duties under this Regulation.” ’ ‘17. Articles 26 and 27 are replaced by the following: “… Article 27 Exchange of information … (2) ESMA shall transmit to the competent authorities responsible for supervising the undertakings referred to in Article 4(1), central banks of Member States, the European System of Central Banks and the European Central Bank, in their capacity as monetary authorities, the European Systematic Risk Board and, where appropriate, to other Member State authorities responsible for overseeing payment and settlement systems, confidential information intended for the performance of their tasks. Similarly, such authorities or bodies shall not be prevented from communicating to ESMA information that ESMA may need in order to carry out its duties under this Regulation.” ’

Justification See paragraph 8 of the opinion.

Amendment 6

Point 3 of Annex I to the proposed regulation (new)

No text. ‘3. In Part II of Section E, point 1 is replaced by the following: “1. every six months: (a) data about the historical default rates of its rating categories, distinguishing between the main geographical areas of the issuers and whether the default rates of these categories have changed over time; and (b) data on the number of the credit ratings which it has issued in a given reporting period, broken down to show: (i) credit ratings requested by a rated entity or a related third party; and (ii) unsolicited credit ratings, together with data indicating the proportion of such unsolicited credit ratings which were higher, equal to, or lower than the relevant credit ratings issued by the credit rating agency appointed by a rated entity or a related third party.” …’

Justification See paragraph 6 of the opinion.

Amendment 7

Annex II to the proposed regulation

‘The following Annex III is added to Regulation (EC) No 1060/2009: SANCTIONS Breaches I. Breaches related to conflicts of interest, organisational or operational requirements … (w) The CRA infringes Article 8a(2)(b) where it fails to provide, on a yearly basis, ratings for at least 10 % of the structured finance instruments for which it has requested access to the information on the website provided by the issuer or related third party. …” ’ ‘The following Annex III is added to Regulation (EC) No 1060/2009: SANCTIONS Breaches I. Breaches related to conflicts of interest, organisational or operational requirements … (w) The CRA infringes Article 8a(2a) where , in a given calendar year it accessed the information on more than 10 structured finance instruments on a website or websites provided pursuant to Article 8a(2) but failed to issue credit ratings for at least 10 % of the structured finance instruments for which it accessed such information . …” ’