Proposal for a Regulation of the European Parliament and of the Council on amending Regulation (EC) No 1060/2009 on credit rating agencies {SEC(2010) 678} {SEC(2010) 679}
Date: 2010-06-02
Institutions: European Commission
Subjects: administrative transparency, consumer information, credit institution, economic recession, exchange of information, financial control, financial solvency, investment, operation of the Institutions, securities

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EUROPEAN COMMISSION 

Brussels, 2.6.2010 
COM(2010) 289 final 

2010/0160 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

On amending Regulation (EC) No 1060/2009 on credit rating agencies  

{SEC(2010) 678} 
{SEC(2010) 679} 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL  

Experience of the financial crisis has exposed important failures in financial supervision, both 
in  particular  cases  and  in  relation  to  the  financial  system  as  a  whole.  The  European 
Commission has piloted a fundamental overhaul of financial supervision in Europe with the 
objective  of  establishing  a  more  efficient,  integrated  and  sustainable  European  system  of 
supervision.  This  builds  on  the  findings  of  the  group  of  high  level  experts,  chaired  by  Mr 
Jacques  de  Larosière,  former  general  director  of  the  International  Monetary  Fund,  and 
mandated by President Barroso to make recommendations to strengthen European supervisory 
arrangements,. The Group presented its report on 25 February 2009 and its recommendations 
were endorsed by the Commission in its Communication to the Spring European Council of 
March 20091.  

The key elements of the reform proposed by the Commission are :  

1. 

2. 

Establishing  a  European  System  of  Financial  Supervisors  (ESFS),  consisting  of  a 
network  of  national  financial  supervisors  working  in  tandem  with  new  European 
Supervisory  Authorities  (ESAs),  created  by  transforming  the  existing  European 
supervisory  committees2  in  a  European  Banking  Authority  (EBA),  a  European 
Insurance and Occupational Pensions Authority (EIOPA), and a European Securities 
and  Markets  Authority  (ESMA),  thereby  combining  the  advantages  of  an 
overarching European framework for financial supervision with the expertise of local 
micro-prudential  supervisory  bodies  that  are  closest  to  the  institutions  operating  in 
their jurisdictions, and 

Establishing  a  European  Systemic  Risk  Board  (ESRB),  which  shall  monitor  and 
assess  potential  threats  to  financial  stability  that  arise  from  macro-economic 
developments and from developments within the financial system as a whole. To this 
end,  the  ESRB  would  provide  an  early  warning  of  system-wide  risks  that  may  be 
building  up  and,  where  necessary,  issue  recommendations  for  action  to  deal  with 
these risks.  

In particular, concerning credit rating agencies, the De Larosière Group was of the view that it 
would  be  far  more  rational  to  entrust  the  Committee  of  European  Securities  Regulators 
(CESR)  with  the  task  of  licensing  credit  rating  agencies  in  the  EU,  monitoring  their 
performance, and in the light of this imposing changes.  

In its Communication of 27 May 2009 on European Financial Supervision3, the Commission 
therefore proposed that a European Supervisory Authority should be given the responsibility 
for the authorisation and supervision of certain entities with pan-European reach, e.g., credit 
rating  agencies.  These  responsibilities  could  include  such  powers  as  those  of  investigation, 
on-site inspections and supervisory decisions. These responsibilities would be defined in the 

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Commission Communication on Driving European Recovery of 4.3.2009, COM(2009) 114 final 
These  are  the  Committee  of  European  Banking  Supervisors  (CEBS),  the  Committee  of  European  Insurance  and  Occupational 
Pensions Supervisors (CEIOPS) and the Committee of European Securities Regulators (CESR). 
Commission Communication on European Financial Supervision of 27.5.2009, COM(2009) 252 final  

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Regulation on Credit Rating Agencies4 of the European Parliament and of the Council. The 
Commission's suggestion was endorsed by the European Council at its meeting in June 2009 
stating clearly that ESMA "should also have supervisory powers for credit rating agencies"5.  

Against this background, Article 39 and recital 51 of the Regulation on credit rating agencies 
of  the  European  Parliament  and  of  the  Council  (CRA  Regulation)  state  that  the  current 
supervisory architecture should not be considered as the long-term solution for the oversight 
of  credit  rating  agencies  and  that  even  if  colleges  of  competent  authorities  are  expected  to 
streamline supervisory cooperation and convergence in this area in the Community, they may 
not substitute all the advantages of more consolidated supervision of the credit rating industry. 
The European Parliament and the Council requested the Commission to put forward by 1 July 
2010  a  report  and  any  legislative  proposal  needed  to  tackle  the  shortcomings  identified  as 
regards supervisory coordination and cooperation arrangements.  

It is important to note that this proposal does not introduce any changes to the Regulation on 
credit rating agencies concerning the substantive conditions that CRAs have to fulfil in order 
to be registered and later on an ongoing basis. Similarly, the conditions under which ratings 
issued from credit rating agencies located in third countries may be used in the Union (via the 
endorsement6  and  certification  mechanisms,7  as  foreseen  in  the  CRA  Regulation)  are  not 
subject  of  the  proposed  amendments  but  will  remain  as  provided  for  in  the  current  CRA 
Regulation. 

2. 

CONSULTATION OF INTERESTED PARTIES  

Two  open  consultations  were  conducted  in  the  development  of  the  legislative  package  of 
proposals  on  the  new  European  financial  supervisory  structure,  which  included  elements 
related to the Regulation on credit rating agencies. Firstly, following  the report of  the high-
level  group  chaired  by  Jacques  de  Larosière  and  the  publication  of  the  4  March  2009 
Commission Communication, the Commission organised a first consultation from 10 March 
to 10 April 2009 as input to its Communication on Financial Supervision in Europe published 
on 27 May 2009. A summary of the public submissions received can be found on: 

http://ec.europa.eu/internal_market/consultations/docs/2009/fin_supervision/summary_en.pdf 

Secondly,  from  27  May  to  15  July  2009,  the  Commission  organised  another  consultation 
round, inviting all interested parties to comment on the more detailed reforms presented in the 
Communication on Financial Supervision in Europe of 27 May 2009. The responses received 
were  for  the  greater  part  supportive  of  the  suggested  reforms,  with  comments  on  detailed 
aspects of the proposed ESRB and ESFS. A summary of the public submissions received can 
be found on: 

http://ec.europa.eu/internal_market/consultations/2009/fin_supervision_may_en.htm 

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Regulation on Credit Rating Agencies adopted by the European Parliament and the Council on xx September 2009. 
European Council of 18/19. June 2009, Presidency conclusions, N. 20. 
Article 4 (3) of the Regulation on credit rating agencies 
Article 5 of the Regulation on credit rating agencies 

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3. 

IMPACT ASSESSMENT  

The May Commission Communication on Financial Supervision in Europe was accompanied 
by  an  impact  assessment  analysing  the  main  policy  options  for  establishing  the  ESFS  and 
ESRB. A second impact assessment has been executed to examine the impact of the proposals 
related  to  the  new  European  financial  supervisory  structure  adopted  by  the  Commission  in 
September  2009  which  includes  also  an  assessment  of  the  establishment  of  the  European 
Securities  and  Markets  Authority  and  changes  in  the  supervisory  structure  of  credit  rating 
agencies.  A  proportionate  impact  assessment  report  has  been  produced  for  this  proposal.  It 
can be found on:  

http://ec.europa.eu/internal_market/securities/agencies/index_en.htm 

4. 

LEGAL ELEMENTS OF THE PROPOSAL  

4.1. 

Legal basis  

The proposal is based on Article 114 TFEU.  

4.2. 

Subsidiarity and proportionality  

The  tasks  to  be  conferred  on  ESMA  are  closely  linked  to  the  measures  put  in  place  as  a 
response to the financial crisis and to those announced in the Commission Communications of 
4 March and 27 May 2009. Community action can address the weaknesses highlighted by the 
crisis and provide a system that is in line with the objective of a stable and single EU financial 
market  for  financial  services  –  giving  to  ESMA  the  necessary  supervisory  powers  for  the 
registration  and  oversight  of  credit  rating  agencies.  The  traditional  division  between  the 
competent authority of the home Member State and the other competent authorities was not 
considered  a  long-term  solution  for  the  oversight  of  credit  rating  agencies  given  the  global 
nature of credit ratings, which are used throughout the European Union. A more consolidated 
supervision of the credit rating industry had been considered as more advantageous when the 
Regulation on Credit Rating Agencies was adopted; however at that moment the existing legal 
framework  was  not  adequate  to  create  such  a  structure.  The  Commission  proposal  for  a 
Regulation  establishing  a  European  Securities  and  Markets  Authority  (ESMA)  creates  the 
adequate  framework  to  give  ESMA  the  necessary  powers  to  perform  the  tasks  for  the 
registration and oversight of credit rating agencies. 

However, as the Regulation covers not only the supervision of credit rating agencies – to be 
done by ESMA –, but also the supervision of the use of credit ratings by individual entities 
which  are  supervised  at  national  level,  national  supervisors  will  remain  responsible  for  the 
supervision  of  the  use  of  credit  ratings  by  those  individual  entities.  As  national  supervisors 
will be able to collect specific information about the use of credit ratings, they should be able, 
to  request  ESMA  to  examine  the  withdrawal  of  a  credit  rating  agency's  registration  or  the 
suspension of the use of credit ratings. However, national competent authorities will not have 
the  power  to  take  supervisory  measures  towards  credit  rating  agencies  where  they  are  in 
breach of the Regulation. 

Moreover,  competent  authorities  will  have  an  obligation  to  cooperate  with  ESMA,  when 
ESMA considers it necessary; therefore Member States will have to maintain the competent 
authorities they have designated under the CRA Regulation. The provisions do not go beyond 
what is strictly necessary to achieve the objectives pursued. The provisions are in accordance 

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with the principles of subsidiarity and proportionality as set out in Article 5 of the Treaty, as 
the objectives of the proposal cannot be sufficiently achieved by the Member States and can 
therefore be better achieved by the Community.  

A Regulation amending the current Regulation is the most appropriate instrument. 

4.3. 

Detailed explanation of the proposal  

The Regulation  on Credit Rating Agencies is to be revised in order to introduce centralised 
oversight  of  credit  rating  agencies  operating  in  the  EU.  ESMA  is  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  ratings  issued  by  rating  agencies 
established  in  third  countries  that  operate  in  the  EU  under  the  certification  or  endorsement 
regimes. Therefore, it is necessary to replace throughout the text any reference to competent 
authorities  in  charge  of  the  registration  and  supervision  of  credit  rating  agencies  by  a 
reference to ESMA. However, some specific supervisory powers related to the use of credit 
ratings  will  remain  in  the  remit  of  national  competent  authorities.  Further,  the  Commission 
retains  its  competence  to  enforce  the  Treaties  and  in  particular  Title  VII  Chapter  1  of  the 
Treaty on the Functioning of the European Union regarding the common rules on competition 
in accordance with the provisions adopted for the implementation of those rules. 

4.3.1.  Amendments to Title I (Subject matter, scope and definitions) 

In  order  to  align  the  Regulation  with  the  new  proposal  for  a  Directive  on  Alternative 
Investment  Fund  Managers,  alternative  investment  funds  have  been  listed  in  Article  4(1)  in 
order to treat them in the same way as the other EU financial institutions with regard to the 
use of credit ratings. This implies that in case alternative investment funds use credit ratings 
for regulatory purposes, those credit ratings must have been issued by a credit rating agency 
registered or certified under this Regulation. 

4.3.2.  Amendments to Title II (Issuing of Credit Ratings)  

In  order  to  avoid  possible  conflicts  of  interest  arising  for  the  CRA  under  the  issuer-pays 
model which are particularly virulent regarding the rating of structured finance instruments, to 
enhance transparency and to increase competition among CRAs, issuers of structured finance 
instruments or related third parties should be required to give access to the information which 
they have given to the CRA they hired for the purpose of rating structured finance instruments 
to  competing  CRAs.  Provided  they  satisfy  certain  organisational  and  confidentiality 
conditions,  competing  CRAs  should  be  given  access,  upon  request,  by  the  rated  entity  or  a 
related  third  party  to  the  information  given  for  the  purposes  of  rating  structured  finance 
instruments  to  the  CRAs  it  hires.  The  competing  CRA  being  granted  access  to  information 
should not use it for any other purposes than for the rating and should be required to provide a 
minimum number of unsolicited ratings, in order to ensure that the request for access to this 
information does not pursue other purposes.  

Contrasting to the other substantive requirements in the CRA Regulation which are addressed 
to credit rating agencies and its staff, this rule imposes disclosure requirements to issuers of 
structured finance instruments. All registered credit rating agencies will have the possibility to 
access  the  information  necessary  for  issuing  unsolicited  ratings  of  structured  finance 
instruments. This will lead to more competition in the rating market and increase the number 
of ratings per instrument so that users of ratings will be able to rely on more than one rating 
for the same instrument.  

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The  Commission  notes  that  the  US  (SEC  Rule  17g-5  published  on  4  December  2009  and 
coming into force in June 2010) has also introduced a similar system. Given the global role 
and  activities  of  CRAs,  it  is  necessary  to  ensure  that  similar  rules  are  applied  to  CRAs 
operating  in  multiple  jurisdictions  in  order  to  maintain  a  level  playing  field  and  a  sufficient 
level  of  competition  between  CRAs.  Furthermore,  these  new  provisions  are  expected  to 
mitigate  conflicts  of  interests  due  to  the  issuers-pay  model.  In  this  context,  in  view  of  its 
potential  benefits  and  the  fact  that  they  seem  to  constitute  a  good  practice  at  international 
level,  the  impact  in  terms  of  costs  of  the  aforementioned  new  provisions  is  likely  not  to  be 
substantial.  Implementing  measures  are  needed  to  specify  further  the  requirements  that  a 
credit rating agency has to fulfil for being granted access to the website, including its capacity 
to ensure the confidentiality of the data. 

4.3.3.  Amendments to Title III (Surveillance of credit rating activities) 

4.3.3.1.  Amendments to Chapter I (Registration procedure) of Title III 

As a result of introduction of the new, single supervisory authority for the oversight of credit 
rating  agencies,  existing  provisions,  which  envisage  a  college  type  of  supervisory  co-
ordination  and  ultimate,  formal  decision-making  by  a  competent  authority  of  the  home 
Member  State,  are  to  be  eliminated.  The  transfer  to  ESMA  of  supervisory  competences  is 
expected  to  better  address  in  the  EU  framework  the  challenge  of  ensuring  effective  and 
efficient oversight of those entities that often develop multi-jurisdictional presence and have 
wide-ranging  cross  border  impact.  Consequently,  in  the  context  of  the  proposed  centralised 
EU-level  supervision  the  colleges  of  supervisors,  which  were  envisaged  to  streamline 
supervisory  co-operation  and  convergence,  are  no  longer  necessary.  The  creation  of  ESMA 
will improve  and  streamline the  procedure for registration, making it  simpler (as a result of 
eliminating redundant consultation steps between authorities in the college and  with CESR) 
and  thus  it  is  possible  to  reduce  the  time  limits  in  the  different  stages  of  the  registration 
process. 

4.3.3.2.  Amendments to Chapter II (Surveillance by ESMA) of Title III 

In order to facilitate day-to-day application of the Regulation, ESMA should be empowered to 
propose  draft  technical  standards  to  be  endorsed  by  the  Commission  on:  (i)  the  registration 
process, including on the information set out in Annex II; (ii) the information that the credit 
rating agency must provide for the application for certification and for the assessment of its 
systemic  importance  to  the  financial  stability  or  integrity  of  financial  markets  referred  to  in 
Article 5 of the Regulation; and (iii) the presentation of the information, including structure, 
format,  method  and  period  of  reporting,  that  credit  rating  agencies  shall  disclose  in 
accordance with Article 11(2) and point 1 of Part II of Section E of Annex I of the Regulation. 

In  order  to  ensure  sufficient  supervisory  and  enforcement  capacity,  ESMA  is  to  be 
empowered  to  require  all  necessary  information  from  CRAs  and  other  persons  related  to 
credit rating activity. It will be able to start investigations  into  the  potential breaches  of  the 
Regulation and in the remit of those it must be able to exercise supervisory powers such as 
examining  records  and  other  relevant  material  and  taking  copies/extracts  thereof,  requiring 
oral  explanations,  hearing  a  person,  requiring  records  of  telephone  and  data  traffic.  The 
ESMA must also be able to conduct on-site inspections. The rights of defence of the persons 
concerned  shall  be  fully  respected  in  the  proceedings.  In  particular,  ESMA  must  give  the 
persons concerned the opportunity of being heard on the matters to which ESMA has taken 
objection.  

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4.3.3.3.  Amendments to Chapter III (Cooperation between ESMA and competent authorities) 

of Title III 

Competent  authorities  are  to  keep  the  oversight  responsibilities  regarding  the  use  of  credit 
ratings  by  the  supervised  entities  (like  credit  institutions,  or  insurance  undertakings)  which 
employ  those  credit  ratings  for  regulatory  purposes.  Those  national  authorities  remain  best 
placed  to  examine  how  the  supervised  entities  use  credit  ratings  in  their  day-to-day  activity 
and to take appropriate action, where necessary.  

National supervisory authorities must also contribute to the supervisory activity of ESMA, by 
ensuring all necessary information exchange and co-operation, which may be required in the 
exercise  of  supervisory  and  enforcement  powers  of  ESMA.  They  will  be  able  to  request 
ESMA  to  examine  whether  the  conditions  for  withdrawal  of  a  credit  rating  agency's 
registration  are  met  and  to  request  ESMA  to  examine  the  suspension  of  the  use  of  credit 
ratings issued by a credit rating agency, which they consider to be in a serious and persistent 
breach of the Regulation on credit rating agencies.  

Where  necessary  or  appropriate  for  reasons  of  efficiency,  in  its  supervisory  activity  ESMA 
must  be  able  to  seek  the  assistance  of  a  competent  supervisory  authority  at  national  level. 
Assistance  by  competent  authorities  should  be  provided  when  ESMA  is  carrying  out 
investigations and on site inspections. 

ESMA  may  also  delegate  specific  supervisory  tasks  to  competent  national  authorities  e.g. 
when supervisory measures have to be undertaken at the remote premises of a CRA or would 
require knowledge and experience with respect to local conditions, including foreign language 
skills. Delegation of tasks should be used in order to prevent disproportionate costs for ESMA 
and  the  supervised  CRAs.  Possible  tasks  that  may  be  delegated  include  the  carrying  out  of 
specific  investigatory  tasks  and  on-site  inspections,  the  assessment  of  an  application  for 
registration,  but  also  tasks  related  to  day-to-day  supervision.  Delegation  of  tasks  will  not 
affect the responsibility of ESMA which may give instructions to the authority to which it has 
delegated a task. ESMA should further specify in guidelines the areas in which it intends to 
make  use  of  the  power  to  delegate  tasks,  including  the  delegation  procedures  to  be  applied 
and any compensation to be granted to the competent authority for carrying out the tasks.  

4.3.4.  Amendments to Title IV (Penalties, Committee procedure, reporting and transitional 

and final provisions) 

4.3.4.1.  Amendments to Chapter I (Penalties, Committee procedure and reporting) of Title IV 

As  the  necessary  underpinning  to  its  supervisory  authority,  ESMA  may  propose  to  the 
Commission to impose periodic penalty payments. This coercive measure is to help achieve 
that: (i) an infringement is put to an end, (ii) complete and correct information which ESMA 
has  requested  is  supplied;  (iii)  credit  rating  agencies  and  other  persons  submit  to  an 
investigation.  ESMA  may  also  propose  fines  to  be  adopted  by  the  Commission,  where, 
intentionally or negligently, some of the provisions of the Regulation on credit rating agencies 
listed  in  Annex  III  have  been  breached.  Detailed  criteria  for  establishing  the  amount  of  the 
fines as well as procedural aspects related to fines will be set out in a delegated act. 

In  addition  to  proposing  sanctions,  ESMA  shall  also  be  empowered  to  adopt  supervisory 
measures  where  a  credit  rating  agency  has  committed  a  breach  of  the  Regulation.  Those 
measures include the temporary prohibition of the issuing of credit ratings and the suspension 
of the use of the credit ratings concerned until the infringement has been put to an end. As a 

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last  resort  measure,  ESMA  is  empowered  to  withdraw  the  registration  of  a  credit  rating 
agency.  

In  addition,  ESMA  has  the  power  to  require  the  credit  ratings  agencies  to  bring  an 
infringement to an end and to issue public notices. Those measures shall be applied in cases 
which  do  not  justify  the  adoption of  a  sanction  or  more  severe  supervisory  measure,  taking 
account  of  the  principle  of  proportionality.  Sanctions,  penalty  payments  and  supervisory 
measures are complementary parts of an effective enforcement regime. 

The committee procedures have been aligned with the Lisbon Treaty. 

4.3.4.2.  Amendments to Chapter II (Transitional and final provisions) of Title IV 

Once ESMA will be in place and operational, the competent authorities of the Member States 
will  have  to  terminate  their  competences  and  duties  related  to  the  supervisory  and 
enforcement activity in the field of credit rating agencies which had been conferred to them 
by the Regulation on credit rating agencies.  

Clear  rules have also  to  be  established for the  transmission  of  files  and  working  documents 
from competent authorities to ESMA. 

5. 

BUDGETARY IMPLICATION  

An  overall  overview  of  the  budgetary  implications  of  the  proposals  setting  up  ESMA  was 
presented  in  September  2009  in  the  impact  assessment  report  and  accompanying  legislative 
financial  statements  accompanying  such  legislative  proposals  (see  the  legislative  financial 
statement  added  to  the  proposal  on  the  setting  up  of  the  European  Securities  Markets 
Authority).  The  specific  implications  on  ESMA  concerning  the  direct  supervision  and 
oversight  of  credit  rating  agencies  are  specified  in  the  legislative  financial  statements 
accompanying this proposal. Both financial statements are to be considered together. Specific 
budgetary  implications  for  the  Commission  are  also  assessed  in  the  financial  statement 
accompanying this proposal.  

The proposal has implications for the Community budget. 

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2010/0160 (COD) 

Proposal for a 

REGULATION (EU) No …/… OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

On amending Regulation (EC) No 1060/2009 on credit rating agencies  

(Text with EEA relevance)  

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,  

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 
thereof,  

Having regard to the proposal from the European Commission8, 

After transmission of the draft legislative act to the national Parliaments,  

Having regard to the opinion of the European Economic and Social Committee9,  

Acting in accordance with the ordinary legislative procedure10,  

Whereas:  

(1) 

(2) 

At  the  request  of  the  Commission,  a  report  published  on  25  February  2009  by  a  high-level 
group  of  experts  chaired  by  J.  de  Larosière  concluded  that  the  supervisory  framework  of  the 
financial  sector  in  Europe  needed  to  be  strengthened  to  reduce  the  risk  and  severity  of  future 
financial  crises  and  recommended  far-reaching  reforms  to  the  structure  of  supervision  , 
including  the  creation  of  a  European  System  of  Financial  Supervisors,  comprising  three 
European  Supervisory  Authorities,  one  for  the  securities  sector,  one  for  the  insurance  and 
occupational  pensions  sector  and  one  for  the  banking  sector,  and  the  creation  of  a  European 
Systemic Risk Board. 

The Commission Communication of 4 March 2009, "Driving European Recovery"11 proposed 
to bring forward draft legislation creating a European System of Financial Supervisors, and the 
Commission  Communication  of  27  May  2009  "European  Financial  Supervision"12  provided 
more detail about the possible architecture of such a new supervisory framework, highlighting 
the specificity of the supervision of credit rating agencies. 

(3) 

The  European  Council,  in  its  conclusions  of  19  June  2009,  recommended  that  a  European 
System  of  Financial  Supervisors,  consisting  of  a  network  of  national  financial  supervisors 

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OJ C , , p. .  
OJ C , , p. .  
OJ C , , p. .  
COM(2009) 114 final. 
COM(2009) 252 final. 

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working  in  tandem  with  the  new  European  Supervisory  Authorities,  the  European  Banking 
Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and 
the European Securities and Markets Authority (ESMA), be established aimed at upgrading the 
quality and consistency of national supervision, strengthening oversight of cross-border groups 
through  the  setting  up  of  supervisory  colleges  and  establishing  a  European  single  rule  book 
applicable  to  all  financial  market  participants  in  the  internal  market.  It  stressed  that  the 
European  Securities  and  Markets  Authority  should  have  supervisory  powers  for  credit  rating 
agencies. Further, the Commission should retain its competence to enforce the Treaties and in 
particular Title VII Chapter 1 of the Treaty on the Functioning of the European Union regarding 
the  common  rules  on  competition  in  accordance  with  the  provisions  adopted  for  the 
implementation of those rules. 

The scope of the European Securities and Markets Authority's action should be clearly defined 
so that financial market participants can identify the authority competent in the field of activity 
of  credit  rating  agencies.  The  European  Securities  and  Markets  Authority  should  assume 
general competence in matters relating to the registration and on-going supervision of registered 
credit rating agencies. 

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.  

As  credit  ratings  are  used  throughout  the  Union,  the  traditional  distinction  between  home 
competent  authority  and  the  other  competent  authorities  and  the  use  of  a  college  type  of 
supervisory co-ordination is not the most adequate for the supervision of credit rating agencies. 
With the setting up of the European Securities and Markets Authority, it is no longer necessary 
to maintain such a structure. The registration process should be thus streamlined and time limits 
should be accordingly reduced. 

The European Securities and Markets Authority should be responsible for the registration and 
on-going  supervision  of  credit  rating  agencies,  however  it  should  not  be  responsible  for  the 
oversight  of  the  users  of  credit  ratings.  National  competent  authorities  should  thus  remain 
responsible  for  the  supervision  of  the  use  of  credit  ratings  by  financial  institutions  and  other 
entities  (such  as  credit  institutions,  investment  firms,  insurance  undertakings,  assurance 
undertakings,  reinsurance  undertakings,  undertakings  for  collective  investment  in  transferable 
securities, institutions for occupational retirement provision and alternative investment funds), 
which  are  supervised  at  national  level  in  the  context  of  the  application  of  other  financial 
services directives, and the use of credit ratings in prospectuses.  

(4) 

(5) 

(6) 

(7) 

(8) 

There is a need to introduce an effective instrument to establish harmonised technical standards 
to facilitate the application of this Regulation in the day to day practice and to ensure a level 
playing  field  and  an  adequate  protection  of  investors  and  consumers  across  the  Union.  As  a 

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(9) 

(10) 

(11) 

(12) 

body  with  highly  specialised  expertise,  it  is  efficient  and  appropriate  to  entrust  the  European 
Securities and Markets Authority with the elaboration of draft technical standards.  

In  the field of  credit  rating  agencies, draft technical standards should  be proposed concerning 
the  registration  process,  the  information  that  the  credit  rating  agency  must  provide  for  the 
application  for  certification  and  for  the  assessment  of  its  systemic  importance  to  the  financial 
stability  or  integrity  of  financial  markets  and  the  presentation  of  the  information,  including 
structure,  format,  method  and  period  of  reporting,  that  credit  rating  agencies  shall  disclose  in 
accordance  with  this  Regulation.  The  draft  technical  standards  have  to  be  adopted  by  the 
Commission to give them binding legal effect, in accordance with Regulation …/… [ESMA].  

In  areas  not  covered  by  technical  standards,  the  European  Securities  and  Markets  Authority 
should  have  the  power  to  issue  non-binding  guidelines  on  issues  related  to  the  application  of 
this Regulation.  

In  order  to  effectively  carry  out  its  duties,  the  European  Securities  and  Markets  Authority 
should  have  the  right  to  request  all  necessary  information  directly  from  financial  market 
participants. Member States' authorities should be obliged to assist the European Securities and 
Markets Authority in enforcing such requests.  

In  order  to  effectively  exercise  its  supervisory  powers,  the  European  Securities  and  Markets 
Authority  should  have  the  right  to  conduct  investigations  and  on-site-inspections.  When 
exercising its supervisory powers, the European Securities and Markets Authority should give 
the persons which are subject to proceedings an opportunity of being heard in order to respect 
their rights of defence. 

(13)  Competent  authorities  should  assist  and  cooperate  with  the  European  Securities  and  Markets 
Authority.  The  latter  may  delegate  specific  supervisory  tasks  to  competent  authorities  for 
instance  where  a  supervisory  task  requires  knowledge  and  experience  with  respect  to  local 
conditions,  which  are  more  easily  available  at  national  level.  Possible  tasks  that  may  be 
delegated  include  the  carrying  out  of  specific  investigatory  tasks  and  on-site  inspections,  the 
assessment  of  an  application  for  registration,  but  also  specific  tasks  related  to  day-to-day 
supervision. The details of such delegation, including the procedures and any compensation to 
be granted to the national competent authorities should be specified in guidelines. 

(14) 

It is necessary to ensure that competent authorities are able to request the European Securities 
and  Markets  Authority  to  examine  whether  the  conditions  for  withdrawal  of  a  credit  rating 
agency's registration are met and to request from the European Securities and Markets Authority 
the suspension of the use of ratings in case a credit rating agency is considered to be in a serious 
and persistent breach of the Regulation. The European Securities and Markets Authority should 
assess the request and take any appropriate measure. 

(15)  The European Securities and Markets Authority should be able to propose to the Commission to 
impose periodic penalty payments. The purpose of those periodic penalty payments should be to 
achieve that an infringement established by the European Securities and Markets Authority is 
put to an end, that complete and correct information which the European Securities and Markets 
Authority has requested is supplied and that credit rating agencies and other persons submit to 
an  investigation.  Moreover,  for  deterrence  purposes  and  to  compel  credit  rating  agencies  to 
comply with the Regulation, the Commission should also be able to impose fines, following a 
request  of  the  European  Securities  and  Markets  Authority,  where  intentionally  or  negligently, 

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specific  provisions  of  the  Regulation  have  been  breached.  The  fine  shall  be  dissuasive  and 
proportionate  to  the  nature  and  seriousness  of  the  breach,  the  duration  of  the  breach  and  the 
economic capacity of the credit rating agency concerned. Detailed criteria for establishing the 
amount  of  the  fines  as  well  as  procedural  aspects  related  to  fines  should  be  set  out  by  the 
Commission in a delegated act. Member States should only remain competent for laying down 
and  implementing  the  rules  on  penalties  applicable  to  the  infringement  of  the  obligation  of 
financial  firms  to  use,  for  regulatory  purposes  only  credit  ratings  issued  by  credit  rating 
agencies registered in accordance with this Regulation. 

(16) 

In case of a breach committed by a credit rating agency, the European Securities and Markets 
Authority  should  be  empowered  to  take  a  range  of  supervisory  measures,  including,  but  not 
limited to, to require the credit rating agency to bring an infringement to an end, to suspend the 
use of ratings, to temporarily prohibit a credit rating agency from issuing ratings and – as a last 
resort  -  to  withdraw  the  registration  when  the  credit  rating  agency  continues  to  seriously 
infringe  the  provision  of  this  Regulation.  The  supervisory  measures  should  be  applied  by  the 
European Securities and Markets Authority taking into account the nature and seriousness of the 
breach  and  the  principle  of  proportionality.  Sanctions,  penalty  payments  and  supervisory 
measures are complementary parts of an effective enforcement regime. 

(17)  For  reasons  of  legal  certainty,  it  is  appropriate  to  establish  clear  transitional  measures  for  the 
transmission  of  files  and  working  documents  from  national  competent  authorities  to  the 
European Securities and Markets Authority.  

(18)  The Commission should be empowered to adopt delegated acts in accordance with Article 290 
of the Treaty in respect of the amendment and further specification of the criteria for assessing 
the equivalence of the regulatory and supervisory framework of a third country in order to take 
into account the developments on financial markets, the adoption of a regulation on fees and the 
amendment of the annexes. 

(19)  Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the 
protection  of  individuals  with  regard  to  the  processing  of  personal  data  and  on  the  free 
movement of such data applies to the processing of personal data carried out in application of 
this Regulation by Member States and operators to which this Regulation applies.  

(20)  The  protection  of  individuals  with  regard  to  the  processing  of  personal  data  is  governed  by 
Regulation  (EC)  No  45/2001  of  the  European  Parliament  and  of  the  Council  of  18  December 
2000  on  the  protection  of  individuals  with  regard  to  the  processing  of  personal  data  by  the 
Community  institutions  and  bodies  and  on  the  free  movement  of  such  data13,  which  is  fully 
applicable to the processing of personal data for the purposes of this Regulation carried out in 
application of this Regulation by Union bodies and agencies.  

(21)  Since  the  objectives  of  the  action  to  be  taken,  i.e.  setting  up  an  efficient  and  effective 
supervisory framework for credit rating agencies by entrusting one single supervisory authority 
with  the  supervision  of  rating  activities  in  the  Union,  providing  a  single  point  of  contact  for 
credit rating agencies and ensuring the consistent application of the rules, cannot be sufficiently 
achieved  at the  Member State level  but  can be better achieved at the Union level, taking into 
account  the  pan  European  structure  and  impact  of  the  rating  activities  to  be  supervised,  the 

13 

OJ L 8, 12.1.2001, p. 1. 

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Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 
5 of the Treaty on European Union. In accordance with the principle of proportionality, as set 
out  in  that  Article,  this  Regulation  does  not  go  beyond  what  is  necessary  in  order  to  achieve 
those objectives. 

(22)  Supervision  of  credit  rating  agencies  by  ESMA  should  only  start  once  ESMA  has  been 
established.  Therefore  the  applicability  of  this  Regulation  shall  be  deferred  until  Regulation 
.../…establishing ESMA has entered into force. 

(23)  Regulation  (EC)  No  1060/2009  on  credit  rating  agencies  should  therefore  be  amended 

accordingly, 

HAVE ADOPTED THIS REGULATION:  

Article 1  
Amendments to Regulation (EC) No 1060/2009 

Regulation (EC) No 1060/2009 is amended as follows:  

1. Article 4 is amended as follows:  

(a) 

The first subparagraph of paragraph 1 is replaced by the following:  

"Credit  institutions  as  defined  in  Directive  2006/48/EC,  investments  firms  as  defined  in 
Directive  2004/39/EC,  insurance  undertakings  subject  to  Council  Directive 73/239/EEC  14, 
assurance undertakings as defined in Directive 2002/83/EC of the European Parliament and of 
the  Council15,  reinsurance  undertakings  as  defined  in  Directive 2005/68/EC  of  the  European 
Parliament and the Council16, undertakings for collective investment in transferable securities 
(UCITS)  as  defined  in  Directive  2009/65/EC,  institutions  for  occupational  retirement 
provision as defined in Directive 2003/41/EC and  alternative investment funds as defined in 
Directive 2010/…/EC may use credit ratings for regulatory purposes only if they are issued by 
credit  rating  agencies  established  in  the  Union  and  registered  in  accordance  with  this 
Regulation."  

(b) 

Paragraph 3 is amended as follows:  

(i) 

Points (b), (c) and (d) are replaced by the following:  

"(b)  the credit rating agency has verified and is able to demonstrate on an ongoing basis to 
the  European  Securities  and  Markets  Authority  (hereinafter  referred  to  as  "ESMA")  that  the 
conduct  of  credit  rating  activities  by  the  third-country  credit  rating  agency  resulting  in  the 
issuing of the credit rating to be endorsed fulfils requirements which are at least as stringent as 
the requirements set out in Articles 6 to 12;  

14 
15 
16 

OJ L 228, 16.8.1973, p. 3. 
OJ L 345, 19.12.2002, p. 1. 
OJ L 323, 9.12.2005, p. 1. 

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the  ability  of  ESMA  to  assess  and  monitor  the  compliance  of  the  credit  rating  agency 

(c) 
established in the third country with the requirements referred to in point (b) is not limited; 

(d) 
the  credit  rating  agency  makes  available  on  request  to  ESMA  all  the  information 
necessary  to  enable  ESMA  to  supervise  on  an  ongoing  basis  the  compliance  with  the 
requirements of this Regulation;" 

(ii)  Point (h) is replaced by the following: 

"(h)  there  is  an  appropriate  cooperation  arrangement  between  ESMA  and  the  relevant 
competent  authority  of  the  credit  rating  agency  established  in  a  third  country.  ESMA  shall 
ensure that such cooperation arrangements shall specify at least: 

(i) 

(ii) 

the mechanism for the exchange of information between ESMA and the relevant 
competent authority of the credit rating agency established in a third country ; and 

the  procedures  concerning  the  coordination  of  supervisory  activities  in  order  to 
enable  ESMA  to  monitor  credit  rating  activities  resulting  in  the  issuing  of  the 
endorsed credit rating on an ongoing basis." 

2. 

(a) 

Article 5 is amended as follows:  

Paragraph 2 is replaced by the following:  

"2.  The  credit  rating  agency  referred  to  in  paragraph 1  may  apply  for  certification.  The 
application  shall  be  submitted  to  ESMA  in  accordance  with  the  relevant  provisions  of 
Article 15." 

(b) 

The first subparagraph of paragraph 3 is replaced by the following:  

"ESMA shall examine and decide on the application for certification in accordance with the 
procedure set out in Article 16. The certification decision shall be based on the criteria set out 
in points (a) to (d) of paragraph 1 of this Article."  

(c) 

Paragraph 4 is replaced by the following:  

"4.  The credit rating agency referred to in paragraph 1 may also apply to be exempted: 

(a) 

on a case-by-case basis from complying with some or all of the requirements set out in 
Section A of Annex I and Article 7(4) if the credit rating agency is able to demonstrate 
that the requirements are not proportionate in view of the nature, scale and complexity of 
its business and the nature and range of its issuing of credit ratings; 

(b) 

from the requirement of physical presence in the Union where such a requirement would 
be too burdensome and disproportionate in view of the nature, scale and complexity of 
its business and the nature and range of its issuing of credit ratings. 

An application for those exemptions shall be submitted by the credit rating agency jointly with 
the  application  for  certification.  When  assessing  that  application,  ESMA  shall  take  into 
consideration the size of the applicant credit rating agency referred to in paragraph 1, having 
regard  to  the  nature,  scale  and  complexity  of  its  business  and  the  nature  and  range  of  its 

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issuing  credit  ratings,  as  well  as  the  impact  of  the  credit  ratings  issued  by  the  credit  rating 
agency on the financial stability and integrity of the financial markets of one or more Member 
States.  On  the  basis  of  those  considerations,  ESMA  may  grant  such  exemption  to  the  credit 
rating agency referred to in paragraph 1." 

(d) 

(e) 

Paragraph 5 is deleted.  

In paragraph 6, the third subparagraph is replaced by the following: 

" The Commission shall specify further or amend the criteria set out in points (a), (b) and (c) 
of  the  second  subparagraph  in  order  to  take  account  of  developments  on  financial  markets. 
Those measures shall be adopted by means of delegated acts in accordance with Article 38a 
and subject to the conditions of Articles 38b and 38c." 

(f) 

Paragraphs 7 and 8 are replaced by the following:  

"7.  ESMA shall establish cooperation agreements with the relevant competent authorities of 
third  countries  whose  legal  and  supervisory  frameworks  have  been  considered  equivalent  to 
this Regulation in accordance with paragraph 6. Such arrangements shall specify at least: 

(a) 

the  mechanism  for  the  exchange  of  information  between  ESMA  and  the  competent 
authorities of third countries concerned; and 

(b) 

the procedures concerning the coordination of supervisory activities. 

8.  Articles 20 and 24 shall apply mutatis mutandis to certified credit rating agencies and to 
credit ratings issued by them." 

3. 

(a) 

Article 6(3) is amended as follows: 

The introductory part of the first subparagraph is replaced by the following: 

"At  the  request  of  a  credit  rating  agency,  ESMA  may  exempt  a  credit  rating  agency  from 
complying with the requirements of points 2, 5 and 6 of Section A of Annex I and Article 7(4) 
if the credit rating agency is able to demonstrate that those requirements are not proportionate 
in view of the nature, scale and complexity of its business and the nature and range of issue of 
credit ratings and that:" 

(b) 

The second subparagraph is replaced by the following: 

"In the case of a group of credit rating agencies, ESMA shall ensure that at least one of the 
credit rating agencies in the group is not exempted from complying with the requirements of 
points 2, 5 and 6 of Section A of Annex I and Article 7(4)." 

4. 

The following Articles 8a and 8b are inserted: 

"Article 8a 
Information on structured finance instruments 

1. 

The issuer of a structured finance instrument or a related third party shall provide to the credit 
rating agency it appoints, on a password-protected website that it shall manage, all information 

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2. 

3. 

necessary  for  the  credit  rating  agency  to  initially  determine  or  monitor  a  credit  rating  of  a 
structured finance instrument according to the methodology set out in Article 8(1).  

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.  

In  order  to  ensure  a  coherent  application  of  this  Article,  the  Commission  shall  adopt  in 
accordance with the regulatory procedure referred to in Article 38(2) detailed rules specifying 
in particular the conditions of access and the requirements of the website in order to ensure the 
accuracy and the confidentiality of data and the protection of personal data in accordance with 
Directive 95/46/EC.  

Article 8b 
Access to rating information  

1. 

A  credit  rating  agency  registered  in  the  Union  shall  maintain  a  password-protected  website 
containing:  

(a)  a  list  of  the  structured  finance  instruments  for  which  it  is  in  the  process  of  providing  a 
credit rating, identifying the type of the structured finance instrument, the name of the issuer 
and the date when the rating process was initiated;  

(b)  a  link  to  the  password  protected  website  on  which  the  issuer  of  the  structured  finance 
instrument  or  a  related  third  party  provides  the  information  required  under  Article  8a(1),  as 
soon as it is in possession of this link.  

2. 

A  credit  rating  agency  shall  grant  access  without  delay  to  the  password  protected  website 
referred  to  in  paragraph  1  to  any  credit  rating  agency  registered  or  certified  under  this 
Regulation  provided  that  the  credit  rating  agency  requesting  access  complies  with  the 
requirements set out in Article 8a (2)." 

5. 

Article 9 is replaced by the following: 

"Article 9 
Outsourcing 

Outsourcing  of  important  operational  functions  shall  not  be  undertaken  in  such  a  way  as  to 
impair  materially  the  quality  of  the  credit  rating  agency’s  internal  control  and  the  ability  of 
ESMA  to  supervise  the  credit  rating  agency’s  compliance  with  obligations  under  this 
Regulation." 

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6. 

Article 10(6) is replaced by the following:  

"6.  A credit rating agency shall not use the name of ESMA or any competent authority in 
such  a  way  that  would  indicate  or  suggest  endorsement  or  approval  by  that  authority  of  the 
credit ratings or any credit rating activities of the credit rating agency."  

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. 

3.  A credit rating agency shall provide annually to ESMA information relating to matters 
set out in point 2 of Part II of Section E Annex I."  

8. 

(a) 

Article 14 is amended as follows:  

Paragraph 2 is replaced by the following:  

"2.  The  registration  shall  be  effective  for  the  entire  territory  of  the  Union  once  the 
registration decision issued by ESMA as referred to in Article 16(3) or Article 17(3) has taken 
effect." 

(b) 

The second subparagraph of paragraph 3 is replaced by the following:  

"A credit rating agency shall, without undue delay, notify ESMA of any material changes to 
the conditions for initial registration, including any opening or closing of a branch within the 
Union." 

(c) 

Paragraphs 4 and 5 are replaced by the following:  

"4.  Without prejudice to Articles 16 or 17, ESMA shall register the credit rating agency if it 
concludes from the examination of the application that the credit rating agency complies with 
the  conditions  for  the  issuing  of  credit  ratings  set  out  in  this  Regulation,  taking  into 
consideration Articles 4 and 6." 

ESMA shall not impose requirements regarding registration which are not provided for 

5. 
in this Regulation." 

9. 

Articles 15 to 20 are replaced by the following: 

"Article 15 
Application for registration 

1. 

The credit rating agency shall submit an application for registration to ESMA. The application 
shall contain information on the matters set out in Annex II. 

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17 

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2. 

3. 

4. 

1. 

2. 

3. 

4. 

1. 

2. 

Where  a  group  of  credit  rating  agencies  applies  for  registration,  the  members  of  the  group 
shall mandate one of their members to submit all the applications to ESMA on behalf of the 
group. The mandated credit rating agency shall provide the information on the matters set out 
in Annex II for each member of the group. 

A credit rating agency may submit its application in any of the official languages of the Union. 

Within  ten  working  days  of  receipt  of  the  application,  ESMA  shall  assess  whether  the 
application  is  complete.  If  the  application  is  not  complete,  ESMA  shall  set  a  deadline  by 
which the credit rating agency is to provide additional information. 

After  assessing  an  application  as  complete,  ESMA  shall  notify  the  credit  rating  agency 
accordingly. 

"Article 16 
Examination of the application for registration of a credit rating agency 
by ESMA 

ESMA shall, within 30 working days of the notification referred to in the second subparagraph 
of Article 15(4) examine the application for registration based on the compliance of the credit 
rating agency with the conditions set out in this Regulation. 

ESMA  may  extend  the  period  of  examination  by  fifteen  working  days,  in  particular  if  the 
credit rating agency envisages either of the following: 

(a) 

endorsing credit ratings as referred to in Article 4(3); 

(b)  using outsourcing;  

(c) 

exemption from compliance in accordance with Article 6(3). 

Within  40  working  days  of  the  notification  referred  to  in  the  second  subparagraph  of 
Article 15(4),  and  within  55  working  days  thereof  where  paragraph 2  of  this  Article  applies, 
ESMA shall adopt a fully reasoned registration or refusal decision.  

The decision issued by ESMA pursuant to paragraph 3 shall take effect on the fifth working 
day following its adoption. 

Article 17 
Examination of the applications for registration of a group 
of credit rating agencies by ESMA 

ESMA shall, within 40 working days of the notification referred to in the second subparagraph 
of  Article 15(4)  examine  the  applications  for  registration  based  on  the  compliance  of  those 
credit rating agencies with the conditions set out in this Regulation. 

ESMA may extend the period of examination by fifteen working days, in particular if any of 
credit rating agencies in the group envisages either of the following: 

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(a) 

endorsing credit ratings as referred to in Article 4(3); 

(b) 

envisages using outsourcing;  

(c) 

exemption from compliance in accordance with Article 6(3). 

Within  50  working  days  of  the  notification  as  referred  to  in  the  second  subparagraph  of 
Article 15(4),  and  within  65  working  days  thereof  where  paragraph 2  of  this  Article  applies, 
ESMA shall adopt fully reasoned individual registration or refusal decisions.  

The decisions issued by ESMA pursuant to paragraph 3 shall take effect on the fifth working 
day following their adoption. 

Article 18 
Notification of the decision on the registration, 
refusal of registration or the withdrawal of registration 
of a credit rating agency 

Within 5 working days of the adoption of a decision under Articles 16, 17 or 20 ESMA shall 
notify  the  credit  rating  agency  concerned.  Where  ESMA  refuses  to  register  the  credit  rating 
agency or withdraws the registration of the credit rating agency, it shall provide full reasons in 
its decision.  

ESMA  shall  communicate  to  the  Commission  and  the  competent  authorities  any  decision 
under Article 16, 17 or 20. 

ESMA shall publish on its website a list of credit rating agencies registered in accordance with 
this Regulation. That list shall be updated within 5 working days following the adoption of a 
decision under Articles 16, 17 or 20.  

Article 19 
Registration and supervisory fees 

ESMA  shall  charge  fees  to  the  credit  rating  agencies  which  shall  fully  cover  ESMA's 
expenditure  necessary  for  the  registration  and  supervision  of  credit  rating  agencies  in 
accordance with this Regulation and the regulation on fees referred to in paragraph 2.  

The  Commission  shall  adopt  by  means  of  delegated  acts  in  accordance  with  Article  38a  a 
regulation  on  fees.  That  regulation  shall  determine  in  particular  the  type  of  fees  and  the 
matters  for  which  fees  are  due,  the  amount  of  the  fees  and  the  way  in  which  they  are  to  be 
paid. The amount of a fee charged to a credit rating agency shall be proportionate to its size 
and economic strength. 

3. 

4. 

1. 

2. 

3. 

1. 

2. 

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19 

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"Article 20 
Withdrawal of registration 

1. 

ESMA shall withdraw the registration of a credit rating agency where the credit rating agency: 

(a) 

expressly renounces the registration or has provided no credit ratings for the preceding 
six months; 

(b)  has obtained the registration by making false statements or by any other irregular means; 

(c) 

no longer meets the conditions under which it was registered; or 

(d)  has  seriously  or  repeatedly  infringed  the  provisions  of  this  Regulation  governing  the 

operating conditions for credit rating agencies. 

The competent authority of a Member State in which credit ratings issued by the credit rating 
agency  concerned  are  used  and  which  considers  that  one  of  the  conditions  referred  to  in 
paragraph 1  has  been  met  may  request  ESMA  to  examine  whether  the  conditions  for 
withdrawal  of  registration  are  met.  If  ESMA  decides  not  to  withdraw  the  registration  of  the 
credit rating agency concerned, it shall provide full reasons. 

The  decision  on  the  withdrawal  of  registration  shall  take  immediate  effect  throughout  the 
Union,  subject  to  the  transitional  period  for  the  use  of  credit  ratings  referred  to  in 
Article 24(2)." 

The title of the Chapter II in Title III is replaced by "Surveillance by ESMA". 

Article 21 is replaced by the following:  

"Article 21 
European Securities and Markets Authority 

Without  prejudice  to  Article  25a,  ESMA  shall  ensure  that  provisions  of  this  Regulation  are 
applied. 

ESMA shall issue and update guidelines on: 

(a) 

the application of the endorsement regime under Article 4(3);  

(b) 

(c) 

the  assessment  of  compliance  of  credit  rating  methodologies  with  the  requirements  set 
out in Article 8(3). 

the  cooperation  between  ESMA  and  the  competent  authorities  for  the  purpose  of  this 
regulation including the procedures and detail relating to the delegation of tasks. 

By  [nine  months  after  the  entry  into  force  of  this  Regulation.],  ESMA  shall  propose  draft 
technical standards for endorsement by the Commission according to Article 7 of Regulation 
…/… [ESMA] on: 

2. 

3. 

10. 

11. 

1. 

2. 

3. 

EN 

20 

   EN 

(a) 

the registration process, including on the information set out in Annex II; 

(b) 

(c) 

information  that  the  credit  rating  agency  must  provide  for  the  application  for 
certification and for the assessment of its systemic importance to the financial stability 
or integrity of financial markets referred to in Article 5. 

the  presentation  of  the  information,  including  structure,  format,  method  and  period  of 
reporting, that credit rating agencies shall disclose in accordance with Article 11(2) and 
point 1 of Part II of Section E of Annex I.  

ESMA  shall  publish,  annually  and  for  the  first  time  by  1  January  2012,  a  report  on  the 
application  of  this  Regulation.  That  report  shall  contain,  in  particular,  an  assessment  of  the 
implementation of Annex I by the credit rating agencies registered under this Regulation.  

ESMA  shall  cooperate  with  the  European  Banking  Authority  established  by  Regulation 
…/…17 and the European Insurance and Pensions Authority established by Regulation …/…18 
and  shall  consult  those  Authorities  before  issuing  guidance  and  proposing  draft  technical 
standards referred to in paragraphs 2 and 3."  

4. 

5. 

12. 

Article 23 is replaced by the following: 

"Article 23 
Non interference with content of ratings 

In  carrying  out  their  duties  under  this  Regulation,  neither  ESMA  nor  any  other  public 
authorities  of  a  Member  State  shall  interfere  with  the  content  of  credit  ratings  or 
methodologies." 

13. 

The following Articles 23a, 23b and 23c are inserted: 

"Article 23a 
Requests for information 

1. 

2. 

ESMA  may  require  credit  rating  agencies,  persons  involved  in  credit  rating  activities,  rated 
entities  and  related  third  parties,  third  parties  to  whom  the  credit  rating  agencies  have 
outsourced certain functions or activities and persons otherwise related or connected to credit 
rating agencies or credit rating activities to provide all information that is necessary in order to 
carry out its duties under this Regulation. 

Where requesting information referred to in paragraph 1, ESMA shall refer to this Article as 
the legal basis of the request and state the purpose of it, specify what information is required 
and  fix  the  time-limit  within  which  it  is  to  be  provided.  It  shall  also  indicate  the  penalties 
provided for in Article 36b in case the production of the required information is incomplete or 
where the answers to questions asked are incorrect or misleading. 

17 
18 

OJ L 25, 29.1.2009, p. 23. 
OJ L 25, 29.1.2009, p. 28. 

EN 

21 

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3. 

The persons referred to in paragraph 1 or their representatives and, in the case of legal persons 
or associations having no legal personality referred to in paragraph 1, the persons authorised to 
represent them by law or by their constitution shall supply the information requested on behalf 
of  the  persons  referred  to  in  paragraph  1  concerned.  .  Representatives  shall  remain  fully 
responsible if the information supplied is incomplete, incorrect or misleading.  

Article 23b  
General investigations 

1. 

ESMA  may  conduct  all  necessary  investigations of persons referred to in Article 23a(1). To 
that end, the officials and other persons authorised by ESMA shall be empowered: 

(a) 

to  examine  any  records,  data,  procedures  and  any  other  material  relevant  to  the 
execution of its tasks; 

(b) 

to take copies of or extracts from such records, data, procedures and other material; 

(c) 

to ask for an oral explanation; 

(d) 

to summon and hear a person; 

(e) 

require records of telephone and data traffic; 

(f) 

interview  any  person  for  the  purpose  of  collecting  information  relating  to  the  subject 
matter of an investigation. 

The persons referred to in Article 23a(1) shall submit to investigations launched by decision of 
ESMA. The persons authorised for the purpose of the investigations referred to in paragraph 1 
shall  exercise  their  powers  upon  production  of  a  written authorisation  specifying  the  subject 
matter  and  purpose  of  the  investigation.  That  authorisation  shall  also  indicate  the  periodic 
penalty payments provided for in Article 36b in case the production of the required records, 
data, procedures or any other material is not provided or incomplete or where the answers to 
questions asked are incorrect or misleading.  

In  good  time  before  the  investigation,  ESMA  shall  inform  the  competent  authority  of  the 
Member State in whose territory the investigation is to be carried out of the investigation and 
of the identity of the authorised persons. Officials of the competent authority of the Member 
State  concerned  shall,  at  the  request  of  ESMA,  assist  those  authorised  persons  to  carry  out 
their duties. 

Article 23c 
On-site inspections 

In order to carry out its duties under this Regulation, ESMA may conduct all necessary on-site 
inspections with or without announcement at the premises of persons referred to in Article 23a 
(1). 

The  officials  and  other  persons  authorised  by  ESMA  to  conduct  an  on-site  inspection  may 
enter  any  business  premises  and  land  of  the  persons  subject  to  the  investigation  decision 

2. 

3. 

1. 

2. 

EN 

22 

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3. 

4. 

5. 

6. 

7. 

8. 

9. 

adopted by ESMA and shall have all the powers stipulated in Article 23b(1). They shall have 
also the power to seal any business premises and books or records for the period and to the 
extent necessary for the inspection.  

The  officials  and  other  persons  authorised  by  ESMA  to  conduct  an  on-site  inspection  shall 
exercise their powers upon production of a written authorisation specifying the subject matter 
and purpose of the inspection and the periodic penalty payments provided for in Article 36b in 
case the persons concerned do not submit to the inspection. In good time before the inspection, 
ESMA shall give notice of the inspection to the competent authority of the Member State in 
whose territory it is to be conducted. 

The  persons  referred  to  in  Article  23a(1)  shall  submit  to  on-site  inspections  ordered  by 
decision of ESMA. The decision shall specify the subject matter and purpose of the inspection, 
appoint the date on which it is to begin and indicate the periodic penalty payments provided 
for  in  Article  36b.  The  ESMA  shall  take  such  decisions  after  consulting  the  competent 
authority of the Member State in whose territory the inspection is to be conducted. 

Officials  of,  as  well  as  those  authorised  or  appointed  by  the  competent  authority  of  the 
Member  State  in  whose  territory  the  inspection  is  to  be  conducted  shall,  at  the  request  of 
ESMA, actively assist the officials and other persons authorised by ESMA. To this end, they 
shall enjoy the powers set out in paragraph 2. 

ESMA  may  also  require  competent  authorities  of  the  Member  States  to  carry  out  specific 
investigatory tasks and on-site inspections as provided for in this Article and in Article 23b(1) 
on its behalf. To this end, competent authorities shall enjoy the same powers as ESMA as set 
out in this Article and in Article 23b(1).  

Where the officials and other accompanying persons authorised by ESMA find that a person 
opposes  an  inspection  ordered  pursuant  to  this  Article,  the  Member  State  concerned  shall 
afford them the necessary assistance, requesting where appropriate the assistance of the police 
or  of  an  equivalent  enforcement  authority,  so  as  to  enable  them  to  conduct  their  on-site 
inspection. 

If  the  assistance  provided  for  in  paragraph  7  requires  authorisation  from  a  judicial  authority 
according to national rules, such authorisation shall be applied for including by anticipation.  

Where authorisation as referred to in paragraph 8 is applied for, the national judicial authority 
shall control that the ESMA decision is authentic and that the coercive measures envisaged are 
neither  arbitrary  nor  excessive  having  regard  to  the  subject  matter  of  the  inspection.  In  its 
control of the proportionality of the measures, the national judicial authority may ask ESMA 
for detailed explanations, in particular on the grounds ESMA has for suspecting infringement 
of this Regulation, as well as on the seriousness of the on-site inspection and on the nature of 
the involvement of the person concerned. However, the national judicial authority may not call 
into question the necessity for the inspection as such nor demand that it be provided with the 
information  in  ESMA's  file.  The  lawfulness  of  ESMA's  decision  shall  be  subject  to  review 
only by the Court of Justice following the procedure set out in Regulation XX/2010 [ESMA]". 

EN 

23 

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14. 

Articles 24 and 25 are replaced by the following: 

"Article 24 
Supervisory measures by ESMA 

1. 

Where there is one of the breaches listed in Annex III committed by a registered credit rating 
agency, ESMA shall take one or more of the following decisions: 

(a)  withdraw the registration of that credit rating agency in accordance with Article 20; 

(b) 

(c) 

temporarily  prohibit  that  credit  rating  agency  from  issuing  credit  ratings  with  effect 
throughout the Union, until the infringement has been brought to an end; 

suspend the use, for regulatory purposes, of the credit ratings issued by that credit rating 
agency with effect throughout the Union, until the infringement has been brought to an 
end; 

(d) 

require the credit rating agency to bring the infringement to an end; 

(e) 

require the issuer of structured finance instruments or the related third party to provide 
access  to  credit  rating  agencies  requesting  it  to  the  website  it  manages  according  to 
Article 8a(1); 

(f) 

issue public notices. 

2. 

Where taking the decisions referred to in points (b) to (f) of paragraph 1, ESMA shall take into 
account the nature and seriousness of the breach, including: 

(i) 

the duration and frequency of the breach; 

(ii)  whether  the  breach  has  revealed  serious  or  systemic  weaknesses  in  the  credit  rating 

agency's procedures or of the management systems or internal controls; 

(iii)  whether  financial  crime  was  facilitated,  occasioned  or  otherwise  attributable  to  the 

breach; 

(iv) 

the loss or risk of loss caused to investors. 

In  addition,  ESMA  may  refer  matters  for  criminal  prosecution  to  the  relevant  national 
authorities. 

3. 

Credit  ratings  may  continue  to  be  used  for  regulatory  purposes  following  the  adoption  of 
measures in points (a) and (c) of paragraph 1 during a period not exceeding: 

(a) 

(b) 

ten  working  days  if  there  are  credit  ratings  of  the  same  financial  instrument  or  entity 
issued by other credit rating agencies registered under this Regulation; or 

three  months  if  there  are  no  credit  ratings  of  the  same  financial  instrument  or  entity 
issued by other credit rating agencies registered under this Regulation. 

EN 

24 

   EN 

4. 

1. 

2. 

ESMA may extend the period referred to in point (b) of the first subparagraph by three months 
in  exceptional  circumstances  relating  to  the  potential  for  market  disruption  or  financial 
instability. 

Without  prejudice  to  Article 20,  ESMA  shall  communicate  any  decision  taken  pursuant  to 
paragraph  1,  without  undue  delay,  to  the  competent  authorities  and  the  Commission  and  it 
shall publicly disclose any such decision on its website within 5 working days from the date 
when it was taken." 

Article 25 
Hearing of the persons concerned 

Before taking decisions as provided for in Article 24(1) ESMA shall give the persons which 
are  the  subject  of  the  proceedings  the  opportunity  of  being  heard  on  the  matters  to  which 
ESMA  has  taken  objection.  ESMA  shall  base  its  decisions  only  on  objections  on  which  the 
parties concerned have been able to comment.  

The obligation referred to in the first subparagraph does not apply if urgent action is needed in 
order to prevent significant damage to the financial system in which case ESMA may adopt 
interim decisions. In such a case ESMA has to give the persons concerned the opportunity of 
being heard as soon as possible after having taken its decision.  

The  rights  of  defence  of  the  persons  concerned  shall  be  fully  respected  in  the  proceedings. 
They shall be entitled to have access to ESMA's file, subject to the legitimate interest of other 
persons  in  the  protection  of  their  business  secrets.  The  right  of  access  to  the  file  shall  not 
extend to confidential information and internal documents of ESMA." 

15. 

The title of Chapter III in Title III is replaced by the following: "Cooperation between ESMA 
and Competent Authorities" 

16. 

The following Article 25a is inserted: 

"Article 25a  
Competent authorities responsible for the supervision and enforcement of Article 4(1)  
(the use of credit ratings) 

1. 

2. 

The competent authorities shall be responsible for the supervision and enforcement of Article 
4(1).  

In order to carry out their duties with regard to the establishment of any breach of Article 4(1), 
the competent authorities shall, in conformity with national law, have all the supervisory and 
investigatory powers that are necessary for the exercise of their functions. They shall exercise 
their powers: 

(a) 

directly; 

(b) 

in collaboration with other authorities, including ESMA; or 

(c) 

by application to the competent judicial authorities. 

EN 

25 

   EN 

3. 

In order to carry out their duties with regard to the establishment of any breach of Article 4(1), 
the  competent  authorities  shall,  in  conformity  with  national  law,  have  the  power  in  their 
supervisory capacity to: 

(a) 

access any document in any form and to receive or take a copy thereof; 

(b)  demand information from any person and if necessary to summon and question a person 

with a view to obtaining information; 

(c) 

carry out on-site inspections with or without announcement; and 

(d) 

require records of telephone and data traffic." 

17. 

Articles 26 and 27 are replaced by the following: 

"Article 26 
Obligation to cooperate 

ESMA  and  the  competent  authorities  shall  cooperate  where  it  is  necessary  for  the  purposes  of  this 
Regulation. 

Article 27 
Exchange of information 

1. 

2. 

18. 

19. 

The competent authorities shall, without undue delay, supply the ESMA and each other with 
the information required for the purposes of carrying out their duties under this Regulation. 

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." 

Articles 28 and 29 are deleted. 

Articles 30, 31 and 32 are replaced by the following: 

"Article 30 
Delegation of tasks from ESMA to competent authorities 

ESMA may delegate specific supervisory tasks to the competent authority of a Member State. Those 
supervisory  tasks  may  in  particular  include  information  requests  in  accordance  with  Article  23a  and 
investigations and on-site inspections in accordance with Article 23c(6). 

Delegation of tasks shall not affect the responsibility of ESMA. 

EN 

26 

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1. 

2. 

1. 

2. 

20. 

21. 

Article 31 
Notifications and suspension requests by competent authorities 

Where  a  competent  authority  is  convinced  that  acts  contrary  to  the  provisions  of  this 
Regulation are being, or have been, carried out on its  territory  or  on  the territory of another 
Member State, it shall give notice of that fact in as specific manner as possible to ESMA.  

ESMA shall take appropriate action. It shall inform the notifying competent authority of the 
outcome and, so far as possible, of significant interim developments.  

Without prejudice to the duty to notify set out in paragraph 1, where the notifying competent 
authority considers that a registered credit rating agency, whose credit ratings are used within 
its  territory  breaches  the  obligations  arising  from  this  Regulation  and  the  breaches  are 
sufficiently serious and persistent to have a significant impact on the protection of investors or 
stability of the financial system in that Member State, the notifying competent authority may 
request  ESMA  to  impose  suspension  of  the  use  of  credit  ratings  of  the  credit  rating  agency 
concerned  for  regulatory  purposes  by  persons  referred  to  in  Article  4(1).  The  notifying 
competent authority shall provide ESMA with full reasons for its request.  

In  case  ESMA  considers  that  the  request  is  not  justified,  it  shall  inform  the  notifying 
competent  authority.  In  case  ESMA  considers  that  the  request  is  justified,  it  shall  take 
appropriate measures to resolve this issue. 

Article 32 
Professional secrecy 

The  obligation  of  professional  secrecy  shall  apply  to  all  persons  who  work  or  who  have 
worked for ESMA, and for the competent authorities or for any other person to whom ESMA 
has delegated tasks, including auditors and experts contracted by ESMA. Information covered 
by professional secrecy shall not be disclosed to another person or authority except where such 
disclosure is necessary for legal proceedings. 

All  the  information  exchanged  under  this  Regulation  between  ESMA,  the  competent 
authorities  and  other  authorities  and  bodies  mentioned  in  Article  27(2)  shall  be  considered 
confidential,  except  where  ESMA  or  the  competent  authority  or  other  authority  or  body 
concerned  states  at  the  time  of  communication  that  such  information  may  be  disclosed  or 
where such disclosure is necessary for legal proceedings." 

Article 33 is deleted. 

Articles 34 and 35 are replaced by the following: 

"Article 34 
Agreement on exchange of information 

ESMA  may  conclude  cooperation  agreements  on  exchange  of  information  with  the  competent 
authorities of third countries only if the information disclosed is subject to guarantees of professional 
secrecy which are at least equivalent to those set out in Article 32. 

EN 

27 

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Such  exchange  of  information  shall  be  intended  for  the  performance  of  the  tasks  of  those  competent 
authorities. 

With  regard  to  transfer  of  personal  data  to  a  third  country,  ESMA  shall  apply  Regulation  (EC)  No 
45/2001. 

Article 35 
Disclosure of information from third countries 

ESMA  may  disclose  the  information  received  from  competent  authorities  of  third  countries  only  if 
ESMA  has  obtained  the  express  agreement  of  the  competent  authority  that  has  transmitted  the 
information  and,  where  applicable,  the  information  is  disclosed  only  for  the  purposes  for  which  that 
competent authority gave its agreement or where such disclosure is necessary for legal proceedings." 

22. 

In Chapter 1 of Title IV, the title is amended as follows:  

"Penalties, fines, periodic penalty payments, committee procedure, delegated powers and reporting"  

23. 

In Article 36, the first subparagraph is amended as follows: 

"1.  Member  States  shall  lay  down  the  rules  on  penalties  applicable  to  infringements  of  the 
provisions of Article 4(1) of this Regulation and shall take all measures necessary to ensure that they 
are implemented. The penalties provided for shall be effective, proportionate and dissuasive." 

24. 

The following Articles 36a to 36d are inserted: 

"Article 36a  
Fines 

1. 

2. 

3. 

4. 

At ESMA's request, the Commission may by decision impose on a credit rating agency a fine 
where, intentionally or negligently, the credit rating agency has committed one of the breaches 
listed in Annex III.  

The  fines  referred  to  in  paragraph  1  shall  be  dissuasive  and  proportionate  to  the  nature  and 
seriousness of the breach, the duration of the breach and the economic capacity of the credit 
rating agency concerned. The amount of the fine shall not exceed 20% of the annual income or 
turnover of the credit rating agency of the preceding business year.  

Notwithstanding paragraph 2, where the credit rating agency has directly or indirectly gained a 
quantifiable financial benefit from the breach, the amount of the fine has to be at least equal to 
that benefit.  

The  Commission  shall  adopt  by  means  of  delegated  acts  in  accordance  with  Article  38a 
detailed rules for the implementation of this Article, specifying in particular: 

(a) 

detailed criteria for establishing the amount of the fine;  

(b) 

the  procedures  for  enquiries,  associated  measures  and  reporting,  as  well  as  rules  of 
procedure for decision-making, including provisions on rights of defence, access to file, 

EN 

28 

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legal representation, confidentiality and temporal provisions and the quantification and 
collection of fines. 

Article 36b 

Periodic penalty payments 

1. 

At ESMA's request, the Commission may, by decision, impose on the persons referred to in 
Article 23a(1) periodic penalty payments in order to compel them: 

(a) 

(b) 

(c) 

to put an end to an infringement, in accordance with a decision taken pursuant to Article 
24(1)(d);  

to  supply  complete  and  correct  information  which  has  been  requested  by  decision 
pursuant to Article 23a; 

to  submit  to  an  investigation  and  in  particular  to  produce  complete  records,  data, 
procedures or any other material required and to complete and correct other information 
provided in an investigation launched by decision taken pursuant to Article 23b;  

(d) 

to submit to an on-site inspection ordered by decision pursuant to Article 23c. 

The periodic penalty payments provided for shall be effective and proportionate. The amount 
of the periodic penalty payments shall be imposed for each day of delay. It shall not exceed 
5% of the average daily turnover in the preceding business year and shall be calculated from 
the date stipulated in the decision. 

Article 36c 
Hearing of the persons concerned 

Before taking decision on a fine or periodic penalty payment as provided for in Articles 36a 
and 36b, the Commission shall give the persons which are the subject of the proceedings the 
opportunity of being heard on the matters to which the Commission has taken objection. The 
Commission shall base its decisions only on objections on which the parties concerned have 
been able to comment.  

The  rights  of  defence  of  the  persons  concerned  shall  be  fully  respected  in  the  proceedings. 
They shall be entitled to have access to the Commission's file, subject to the legitimate interest 
of other persons in the protection of their business secrets. The right of access to the file shall 
not extend to confidential information and internal documents of the Commission." 

Article 36d 
Provisions common to fines and periodic penalty payments 

The Commission shall disclose to the public every fine and periodic penalty payment that has 
been imposed according to Articles 36a and 36b. 

Fines  and  periodic  penalty  payments  imposed  pursuant  to  Articles  36a  and  36b  are  of  an 
administrative nature. 

2. 

1. 

2. 

1. 

2. 

EN 

29 

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Article 36e 
Review by the Court of Justice 

The  Court  of  Justice  shall  have  unlimited  jurisdiction  to  review  decisions  whereby  the 
Commission has fixed a fine or imposed a periodic penalty payment. It may annul, reduce or 
increase the fine or periodic penalty payment imposed." 

25. 

Articles 37 and 38 are replaced by the following: 

"Article 37 
Amendments to Annexes 

The Commission may amend the Annexes by means of delegated acts in accordance with Article 38a 
and  subject  to  the  conditions  of  Articles  38b  and  38c  in  order  to  take  account  of  developments, 
including  international  developments,  on  financial  markets,  in  particular  in  relation  to  new  financial 
instruments. 

Article 38 
Committee procedure 

1. 

2 

The  Commission  shall  be  assisted  by  the  European  Securities  Committee  established  by 
Commission Decision 2001/528/EC19. 

Where reference is made to this paragraph, Article 5 and Article 7 of Decision 1999/468/EC 
shall apply, having regard to the provisions of Article 8 thereof.  

3. 

The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months." 

26. 

The following Articles 38a, 38b and 38c are inserted: 

"Delegating powers  

Article 38a 
Exercise of the delegation 

1. 

2. 

3. 

The powers to adopt the delegated acts referred to in the third  subparagraph of Article 5(6), 
Article  19(2),  Article  36a(4)  and  Article  37  shall  be  conferred  on  the  Commission  for  an 
indeterminate period of time. 

As  soon  as  it  adopts  a  delegated  act,  the  Commission  shall  notify  it  simultaneously  to  the 
European Parliament and to the Council. 

The powers to adopt delegated acts are conferred on the Commission subject to the conditions 
laid down in Articles 38b and 38c.  

19 

OJ L 191, 13.7.2001, p. 45. 

EN 

30 

   EN 

                                                 
1. 

2. 

3. 

1. 

2. 

3. 

Article 38b 
Revocation of the delegation 

The delegation of power referred to in the third subparagraph of Article 5 (6), Article 19(2), 
Article 36a(4) and Article 37 may be revoked at any time by the European Parliament or by 
the Council. 

The  institution  which  has  commenced  an  internal  procedure  for  deciding  whether  to  revoke 
the delegation of power shall inform the other legislator and the Commission at the latest one 
month before the final decision is taken, stating the delegated powers which could be subject 
to revocation and the reasons for a revocation. 

The decision of revocation shall put an end to the delegation of the powers specified in that 
decision. It shall take effect immediately or at a later date specified therein. It shall not affect 
the validity of the delegated acts already in force. It shall be published in the Official Journal 
of the European Union.  

Article 38c 
Objections to delegated acts 

The European Parliament and the Council may object to the delegated act within a period of 
two months from the date of notification. At the initiative of the European Parliament or the 
Council this period shall be extended by one month.  

If, on expiry of that period, neither the European Parliament nor the Council has objected to 
the delegated act the delegated act shall enter into force at the date stated therein. 

The delegated act may be published in the Official Journal of the European Union and enter 
into  force  before  the  expiry  of  that  period  if  the  European  Parliament  and  the  Council  have 
both informed the Commission of their intention not to raise objections.  

If  the  European  Parliament  or  the  Council  objects  to  the  adopted  delegated  act,  it  shall  not 
enter  into  force.  The  institution  which  objects  shall  state  the  reasons  for  objecting  to  the 
delegated act." 

27. 

Article 39 is amended as follows:  

(a) 

(b) 

"3. 

Paragraph 2 is deleted. 

Paragraph 3 is replaced by the following:  

By  1  July  2011,  the  Commission  shall,  in  the  light  of  developments  in  the  regulatory  and 
supervisory  framework  for  credit  rating  agencies  in  third  countries,  present  a  report  to  the 
European Parliament and to the Council concerning the effects of those developments and of 
the transitional provisions referred to in Article 40 on the stability of financial markets in the 
Union." 

EN 

31 

   EN 

28. 

The third paragraph of Article 40 is replaced by the following: 

"Existing credit rating agencies may continue issuing credit ratings which may be used for regulatory 
purposes  by  the  financial  institutions  referred  to  in  Article  4(1)  unless  registration  is  refused.  Where 
registration is refused, Article 24(2) and (3) shall apply". 

29. 

The following Article 40a is inserted: 

"Article 40a 
Transitional measures related to ESMA 

1. 

2. 

3. 

4. 

5. 

30. 

31. 

All competences and duties related to the supervisory and enforcement activity in the field of 
credit  rating  agencies,  which  were  conferred  to  the  competent  authorities  of  the  Member 
States,  whether  acting  as  competent  authorities  of  the  home  Member  State  or  not,  and  their 
colleges where those have been established, shall be terminated on [one month after the entry 
into force of this Regulation]. 

Any  files  and  working  documents  related  to  the  supervisory  and  enforcement  activity  in  the 
field of credit rating agencies, including any on-going examinations and enforcement actions 
shall be taken over by ESMA on … [one months after the entry into force of this Regulation].  

The competent authorities and colleges referred to in paragraph 1 shall ensure that any existing 
records and working papers shall be transferred to ESMA [one month after the entry into force 
of  this  Regulation].Those  competent  authorities  and  colleges  shall  also  render  all  necessary 
assistance  and  advice  to  ESMA  to  facilitate  effective  and  efficient  transfer  and  taking  up  of 
supervisory and enforcement activity in the field of credit rating agencies. 

ESMA  shall  act  as  the  legal  successor  of  competent  authorities  and  colleges  referred  to  in 
paragraph  1  in  any  administrative  or  judicial  proceedings  that  result  from  supervisory  and 
enforcement  activity  pursued  under  this  Regulation  prior  to  [one  month  after  the  entry  into 
force of this Regulation].  

Where judicial review of a decision, which was taken by a competent authority referred to in 
paragraph 1 under this Regulation , is on-going on [one month after the entry into force of this 
Regulation],  the  case  shall  be  transferred  to  the  General  Court,  unless  the  judgement  of  the 
court reviewing that decision in the Member State is to be rendered within two months after 
[one month after the entry into force of this Regulation.]." 

Annex I is amended in accordance with Annex I to this Regulation. 

A new Annex III is added as set out in Annex II to this Regulation.  

Article 2 
Entry into force  

This  Regulation  shall  enter  into  force  on  the  twentieth  day  following  that  of  its  publication  in  the 
Official Journal of the European Union.  

This Regulation shall be binding in its entirety and directly applicable in all Member States from the 
day of entry into force of the Regulation …/… [ESMA].  

EN 

32 

   EN 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President  

EN 

33 

   EN 

Annex I 

Annex I to Regulation (EC) No 1060/2009 is amended as follows: 

1. 

In Section A, the last subparagraph of point 2 is replaced by the following: 

"Opinions  of  the  independent  members  of  administrative  or  supervisory  board  issued  on  the 
matters referred to in points (a) to (d) shall be presented to the board periodically and shall be 
made available to ESMA on request." 

2. 

In Section B , the first subparagraph of point 8 is replaced by the following: 

"Records and audit trails referred to in point 7 shall be kept at the premises of the registered 
credit rating agency for at least five years and be made available upon request to ESMA." 

EN 

34 

   EN 

The following Annex III is added to Regulation (EC) No 1060/2009: 

Annex II 

"ANNEX III 

SANCTIONS 

Breaches 

I. 

a) 

b) 

c) 

d) 

e) 

f) 

g) 

h) 

i) 

j) 

Breaches related to conflicts of interest, organisational or operational requirements 

The  CRA  infringes  Article  6(2)  in  connection  with  Annex  I  Section  B  point  3  by  issuing  a 
credit rating or in the case of an existing credit rating by not disclosing immediately that the 
credit rating is potentially affected in the situations described in point 3 (a) to (d).  

The  CRA  infringes  Article  6(2)  in  connection  with  Annex  I  Section  B  point  4  first 
subparagraph by providing consultancy or advisory services. 

The  CRA  infringes  Article  6  (2)  in  connection  with  Annex  I  Section  B  point  4  third 
subparagraph  by  not  ensuring  that  the  provision  of  an  ancillary  service  does  not  present  a 
conflict of interest with its credit rating activity  

The CRA infringes Article 4(3) by endorsing a credit rating issued in a third country without 
the conditions as listed in Article 4(3)(a) to (h) being satisfied 

The  CRA  infringes  Article  6(2)  in  connection  with  Annex  I  Section  A  point  2  third 
subparagraph  by  not  appointing  the  required  number  of  independent  members  of  the 
administrative or supervisory board. 

The  CRA  infringes  Article  6(2)  in  connection  with  Annex  I  Section  A  point  2  fourth 
subparagraph  first  or  second  sentence  by  setting  a  compensation  system  for  independent 
members linked to the business performance of the CRA or by setting the term of office for a 
period exceeding five years. 

The CRA infringes Article 6(2) in connection with Annex I Section A point 6 by not ensuring 
that the conditions enabling the compliance function to discharge its responsibilities properly 
and independently as defined in Annex I Section A point 6 (a) to (d) are satisfied. 

The  CRA  infringes  Article  7(2)  by  not  ensuring  that  a  person  mentioned  in  that  Article 
initiates or participates in negotiations regarding fees or payments. 

The CRA infringes Article (3) in connection with Annex I Section C point 1 by not ensuring 
that a relevant person does not buy or sell or engage in a transaction with an affected financial 
instrument. 

The CRA infringes Article 7(3) in connection with Annex I Section C point 2 by not ensuring 
that a relevant person does not participate or influences the determination of a credit rating. 

EN 

35 

   EN 

k) 

l) 

m) 

n) 

o) 

p) 

q) 

r) 

s) 

t) 

u) 

v) 

w) 

x) 

The CRA infringes Article 7(3) in connection with Annex I Section C point 3(b), (c) and (d), 
by  not  ensuring  that  a  relevant  person  does  not  disclose  or  use  or  share  confidential 
information. 

The CRA infringes Article 7(3) in connection with Annex I Section C point 4 by not ensuring 
that a relevant person does not solicit or accept money, gifts or favours. 

The CRA infringes Article 7(3) in connection with Annex I Section C point 7 by not ensuring 
that a relevant person does not take up a key management position. 

The  CRA  infringes  Article  7(4)  in  connection  with  Annex  I  Section  C  point  8(a)  by  not 
ensuring  that  the  lead  rating  analyst  is  not  involved  in  credit  rating  activities  related  to  the 
same rated entity or its related third parties for a period exceeding four years. 

The  CRA  infringes  Article  7(4)  in  connection  with  Annex  I  Section  C  point  8(b)  by  not 
ensuring  that  the  rating  analyst  is  not  involved  in  credit  rating  activities  related  to  the  same 
rated entity or its related third parties for a period exceeding five years. 

The  CRA  infringes  Article  7(4)  in  connection  with  Annex  I  Section  C  point  8(c)  by  not 
ensuring that a person approving credit ratings is not involved in credit rating activities related 
to the same rated entity or its related third parties for a period exceeding seven years. 

The  CRA  infringes  Article  7(4)  in  connection  with  Annex  I  Section  C  point  8  second 
subparagraph by not ensuring that a relevant person is not involved in credit rating activities 
within two years of end of the periods mentioned. 

The  CRA  infringes  Article  7(5)  by  introducing  compensation  and  performance  evaluation 
contingent  on  the  amount  of  revenue  that  the  CRA  derives  from the  rated  entities  or  related 
third parties. 

The  CRA  infringes  Article  8(5)  by  not  monitoring  its  credit  ratings  or  by  not  reviewing  its 
credit ratings or methodologies on an ongoing basis and at least annually.  

The CRA infringes Article 8(6) b) by not or not timely reviewing the affected credit ratings 
when methodologies, models or key rating assumptions are changed 

The  CRA  infringes  Article  8(6)(c)  by  not  re-rating  a  credit  rating  if  the  overall  combined 
effect of the changes of the methodologies, models or ratings assumptions affects this credit 
rating.  

The CRA which requests access to the website of an issuer of a structured finance instrument 
or  a  related  third  party  infringes  Article  8a(2)(a)  if  it  does  not  have  the  systems  and  the 
organisational structure in place to ensure the confidentiality of the information thus obtained.  

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 CRA infringes Article 10(2) in connection with Annex I Section D Part I point 4 second 
paragraph by issuing a credit rating or not withdrawing an existing rating.  

EN 

36 

   EN 

II. 

a) 

b) 

c) 

d) 

e) 

f) 

Breaches related to obstacles to the supervisory activities 

The CRA infringes Article 6(2) in connection with Annex I Section B point 7(a) to (h) by not 
arranging for records or audit trails as required by these provisions. 

The  CRA  infringes  Article  6(2)  in  connection  with  Annex  I  Section  B  point  8  first 
subparagraph  by  not  keeping  records  or  audit  trails  for  at  least  five  years  or  by  not  making 
available those records or audit trails to the competent authorities. 

The CRA infringes Article 6(2) in connection with Annex I Section B point 9 by not retaining 
the records for the duration of the relationship with the rated entity or its related third party. 

The CRA infringes Article 11(2) by not making available the required information or by not 
providing that information in the required format. 

The CRA infringes Article 11(3) in connection with Annex I Section E Part II point 2 by not 
providing the required lists. 

The  CRA  infringes  the  second  subparagraph  of  Article  14(3)  by  not  or  not  timely  notifying 
ESMA of any material changes to the conditions for initial registration. 

III. 

Breaches related to disclosure provisions  

a) 

b) 

c) 

d) 

f) 

g) 

h) 

i) 

The  CRA  infringes  Article  6(2)  in  connection  with  Annex  I  Section  B  point  2  by  not 
disclosing the names of the rated entities or related third parties from which it receives more 
than 5 % of its annual revenue. 

The  CRA  infringes  Article  6(2)  in  connection  with  Annex  I  Section  B  point  4  third 
subparagraph by not disclosing in the final report an ancillary service provided for the rated 
entity or its related third party. 

The  CRA  infringes  Article  8(1)  by  not  disclosing  the  methodologies,  models  and  key  rating 
assumptions it uses in its credit rating activities. 

The CRA infringes Article 8(6) a) by not disclosing immediately the likely scope of affected 
credit ratings when methodologies, models or key rating assumptions are changed. 

The  CRA  infringes  Article  8b(1)  by  not  disclosing  immediately  on  the  password-protected 
website the information according to Article 8b(1)(a) and (b). 

The CRA infringes Article 8b(2) by not granting access to the website to registered or certified 
credit rating agencies fulfilling the conditions of Article 8a(2). 

The issuer of a structured finance instrument or a related third party infringes Article 8a(2) by 
not  providing  access  to  the  password-protected  website  that  it  manages  to  credit  rating 
agencies fulfilling the conditions under Article 8 a(2).  

The  CRA  infringes  Article  8a(2)  by  imposing  on  the  issuer  or  the  related  third  party  any 
provisions aiming at preventing access to the website to any credit rating agencies requesting 
it and fulfilling the conditions under Article 8a(2).  

EN 

37 

   EN 

j) 

k) 

l) 

m) 

n) 

o) 

p) 

The CRA infringes Article 10(2) in connection with Annex I Section D Part I point 1, point 
2((a) to (e), point 4 first subparagraph or point 5 or Part II points 1, 2, 3 or 4 by not providing 
the information as required by these provisions when presenting a rating. 

The CRA infringes Article 10(2) in connection with Annex I Section D Part I point 3 by not 
informing the rated entity at least 12 hours before publication of the credit rating. 

The  CRA  infringes  Article  10(3)  by  not  ensuring  that  an  additional  symbol  is  used  which 
distinguishes credit ratings for structured finance instruments from other credit ratings. 

The  CRA  infringes  Article  10(4)  by  not  disclosing  its  policies  and  procedures  regarding 
unsolicited credit ratings. 

The CRA infringes Article 10(5) by not providing the information as required by this Article 
or by not identifying an unsolicited credit rating. 

The CRA infringes Article 11(1) by not disclosing or updating information relating to matters 
set out in Annex I, Part I, Section E. 

The CRA infringes Article 12 by not or not timely publishing a transparency report including 
information set out in Part III of section E of Annex I." 

EN 

38 

   EN 

LEGISLATIVE FINANCIAL STATEMENT  

to be used for any proposal or initiative submitted to the legislative authority  

(Articles 28 of the Financial Regulation and 22 of the implementing rules) 

1. FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative  

1.2. 

Policy area(s) concerned in the ABM/ABB structure 

1.3. 

Nature of the proposal/initiative  

1.4. 

Objective(s)  

1.5. 

Grounds for the proposal/initiative  

1.6. 

Duration and financial impact  

1.7. 

Management method(s) envisaged  

2. MANAGEMENT MEASURES  

2.1. 

Monitoring and reporting rules  

2.2. 

Management and control system  

2.3. 

Measures to prevent fraud and irregularities  

3. ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1. 

Heading(s) of the multiannual financial framework and expenditure budget line(s) affected  

3.2. 

Estimated impact on expenditure  

3.2.1 

Summary of estimated impact on expenditure  

3.2.2 

Estimated impact on operational appropriations  

3.2.3 

Estimated impact on appropriations of an administrative nature 

3.2.4  Compatibility with the current multiannual financial framework 

3.2.5 

Third-party participation in financing  

3.3. 

Estimated impact on revenue 

EN 

39 

   EN 

I. FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1.Title of the proposal/initiative  

Regulation (EC) No xxx of the European Parliament and of the Council amending Regulation (EC) N° 
1060/2009 on credit rating agencies 

1.2. Policy area(s) concerned in the ABM/ABB structure20  

Internal Market – Financial markets 

1.3. Nature of the proposal/initiative  

(cid:58) The proposal/initiative relates to a new action  
(cid:133) The proposal/initiative relates to a new action following a pilot project/preparatory action21  
(cid:133) The proposal/initiative relates to the extension of an existing action  
(cid:133) The proposal/initiative relates to an action redirected towards a new action  

1.4. Objectives 

1.4.1 The Commission's multiannual strategic objective(s) targeted by the proposal/initiative  

Entrusting  ESMA  with  supervisory  powers  will  make  supervision  of  CRAs  in  the  Community  more 
efficient and effective. 

This more effective supervisory framework will better ensure compliance of CRAs with the substantive 
requirements  of  the  CRA  Regulation  thereby  contributing  to  the  general  strategic  objectives  of  the 
Commission  in  the  field  of  financial  services,  namely  to  ensure  the  stability  of  financial  markets,  to 
enhance investor protection and to enhance transparency in financial markets. 

1.4.2 Specific objective(s) and ABM/ABB activity(ies) concerned  

Specific objective  

The following objectives of the proposed measure have been identified: 

1. Securing effective supervision of CRAs in the EU; 

2. Streamlining the supervisory architecture for CRA oversight, and 

3. Ensuring legal certainty for CRAs and investors.  

Flowing from these objectives a number of operational objectives have been defined:  

1. Ensure a single point of contact for CRAs and clear competences, 

2. Ensure efficiency gains in registration and supervision process, 

20 
21 

ABM: Activity-Based Management – ABB: Activity-Based Budgeting. 
As referred to in Article 49(6)(a) or (b) of the Financial Regulation. 

EN 

40 

   EN 

                                                 
3. Ensure a consistent application of substantive rules of the CRA Regulation, 

4. Ensure better alignment of incentives for the supervisory authorities to cope with the pan European 
activity of supervised entities 

ABM/ABB activity(ies) concerned 

1.4.3 Expected result(s) and impact 
Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

1. More effective supervision of CRA in the EU which will enhance quality and transparency of rating 
activity to the benefit of investors and financial stability 
2. Single point of contact and clear competences reducing the burden for supervised entities and 
national supervisory authorities 
3. Consistent application of substantive rules of CRA Regulation will improve legal certainty for CRA 
industry and improve the quality and transparency of rating activities. 
4. Efficiency gains in registration and supervisors process. This will reduce the burden for supervised 
entities, supervisors and last not least the European taxpayers. 

1.4.4. Indicators of results and impact  
Specify the indicators for monitoring implementation of the proposal/initiative. 

1. Expected result: More effective supervision of CRAs in the EU  
- Number of breaches of CRA Regulation  
- Number of sanctions and penalty payments imposed in reaction to breaches 
- Number of onsite inspections 
- Number of supervisory measures  
2. Expected result: Establish a single point of contact for supervised CRAs and clear competences  

Indicators: 

• 

• 

Number of supervisory authorities involved in the registration/supervisory process 

Number of conflicts of competences between authorities involved in supervising CRAs 

3. Expected result: Consistent application of substantive rules of CRA Regulation 

Indicators: 

• Number of breaches of CRA Regulation 

• Number of complaints received by the Commission from CRAs/users of ratings  

• Number of appeals from CRAs to ESMA/ Courts 

4. Expected result: Efficiency gains in registration and supervisory process 

Indicator: 

•  Time  period  needed  for  registration  (from  submission  of  application  to  the  issuance  of  registration 
decision)  

EN 

41 

   EN 

•  Time  period  to  take  supervisory  measures  (from  detection  of  breach  of  a  rule  to  the  adoption  of  a 
supervisory measure) 

• Number of staff involved in CRA supervision 

1.5. Grounds for the proposal/initiative  

1.5.1 Requirement(s) to be met in the short or long term  

In the short term the ESMA shall be entrusted with the power to register and to supervise CRAs which 
will generate efficiency gains, more effective supervision and strengthen the consistent application of 
the CRA Regulation. In the long term the measure will lead to a better compliance of CRAs with the 
rules of the CRA Regulation thereby improving quality and transparency of the rating activity. 

ESMA will be entrusted with CRA supervision for an undetermined period. 

1.5.2 Added value of EU involvement 

Though  the  supervisory  framework  currently  prescribed  by  the  CRA  Regulation  has  not  been  put  in 
place  yet,  it  is  already  possible  to  identify  certain  shortcomings  which  underpin  the  need  for 
Community  involvement.  Those  deficiencies  and  their  main  consequences  for  CRAs  and  supervisors 
are (see Section 3 of impact assessment accompanying this proposal): 

• 

Multiplicity of supervisors involved and risks of conflicts over competences;  

Risk  of  divergent  and  inconsistent  application  of  the  CRA  Regulation  in  individual  acts  by 

• 
competent authorities in the Member States;  

• 

Burdensome and time-consuming registration and supervisory 

Process; 

• Risk of misaligned incentives and lack of Community perspective of national supervisors 

As  has  been  shown  in  the  impact  assessment,  entrusting  ESMA  with  registration  and  supervision  of 
CRAs will remedy or significantly improve those problems.  

1.5.3 Lessons learned from similar experiences in the past 

It is the first time that direct supervisory powers over financial institutions are granted to a European 
Supervisory Authority. 

1.5.4 Coherence and possible synergy with other relevant instruments 

This  proposal  is  coherent  with  the  draft  Regulation  establishing  a  European  Securities  and  Markets 
Authority (COM (2009) 503) of 23.09.2009. 

1.6. Duration and financial impact  

(cid:58) Proposal/initiative of unlimited duration  

EN 

42 

   EN 

 
1. 7. Management mode(s) envisaged22  

(cid:133) Centralised direct management by the Commission  
(cid:133) Centralised indirect management with the delegation of implementation tasks to: 
(cid:133) 
executive agencies  
bodies set up by the Communities23  
(cid:58) 
(cid:133) 
national public-sector bodies/bodies with public-service mission  
(cid:133) 
persons entrusted with the implementation of specific actions pursuant to Title V of the Treaty 
on  European  Union  and  identified  in  the  relevant  basic  act  within  the  meaning  of  Article  49  of  the 
Financial Regulation  
(cid:133) Shared management with the Member States  
(cid:133) Decentralised management with third countries  
(cid:133) Joint management with international organisations (to be specified) 

If more than one management mode is indicated, please provide details in the "Comments" section. 

Comments  

2. MANAGEMENT MEASURES  

2.1. Monitoring and reporting rules  

Specify frequency and conditions. 

Article 66 of the draft Regulation establishing the European Securities and Markets Authority provides 
for an evaluation of the experience acquired as a result of the operation of the Authority within three 
years  from  the  effective  start  of  its  operation,  which  would  include  an  assessment  of  ESMAs  direct 
supervisory powers over CRAs. To this end, the Commission shall publish a general report that shall be 
forwarded to the European Parliament and to the Council. 

2.2. Management and control system  

2.2.1 Risk(s) identified  

An  impact  assessment  concerning  this  proposal  on  amendments  to  the  Regulation  on  credit  rating 
agencies has been carried out identifying costs and benefits of different policy options to address the 
identified problems. 

The  risk  of  financing  ESMA's  activities  by  industry  fees  in  the  first  year  of  its  operation  (2011)  has 
been eliminated by providing for financing by the Community budget/ Member States as foreseen in 
the ESMA Regulation (40/60 ratio).  

22 

23 

Details  of  management  modes  and  references  to  the  Financial  Regulation  may  be  found  on  the  BudgWeb  site: 
http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html 
As referred to in Article 185 of the Financial Regulation. 

EN 

43 

   EN 

                                                 
2.2.2 Control method(s) envisaged  

Management and control systems as provided for in the draft ESMA Regulation will apply also with 
regard to the supervision of CRAs. 

The final set of indicators to assess the performance of the European Securities and Markets Authority 
in the field of credit rating agencies will be decided by the Commission at the time of conducting the 
first required evaluation. For the final assessment, the quantitative indicators will be as important as the 
qualitative evidence gathered in the consultations. The evaluation shall be repeated every three years. 

2.3. Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures. 

For  the  purposes  of  combating  fraud,  corruption  and  any  other  illegal  activity,  the  provisions  of 
Regulation  (EC)  No  1073/1999  of  the  European  Parliament  and  of  the  Council  of  25  May  1999 
concerning  investigations  conducted  by  the  European  Anti-Fraud  Office  (OLAF)  shall  apply  to  the 
ESMA without any restriction. 

The Authority shall accede to the Interinstitutional Agreement of 25 May 1999 between the European 
Parliament,  the  Council  of  the  European  Union  and  the  Commission  of  the  European  Communities 
concerning internal  investigations by the  European Anti-Fraud  Office  (OLAF) and shall immediately 
adopt appropriate provisions for all staff of the Authority. 

The funding decisions and the agreements and the implementing instruments resulting from them shall 
explicitly stipulate that the Court of Auditors and OLAF may, if need be, carry out on-the-spot checks 
on  the  beneficiaries  of  monies  disbursed  by  the  Authority  as  well  as  on  the  staff  responsible  for 
allocating these monies. 

EN 

44 

   EN 

3. ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1. Heading(s) of the multiannual financial framework and expenditure budget line(s) affected  

•  Existing expenditure budget lines  

In order of multiannual financial framework headings and budget lines. 

Heading 
of 
multiannu
al 
financial 
framewor
k 

Budget line 

Type of  
expenditure

Contribution  

Number  
1A……  Competitiveness  for  Growth  and 
Employment  

DA/NDA 
(24) 

from 
EFTA25 
countries 

from 
candidate 
countries26 

from third 
countries 

within the meaning 
of Article 18(1)(aa) 
of the Financial 
Regulation  

12.0404.01. 

ESMA  Subsidy  under  Titles  1  and  2 
(Staff and administrative expenditure) 

12.0404.02 

ESMA-  Subsidy  under  Title  3 
(Operating expenditure) 

Diff 

YES 

NO 

NO 

NO 

Diff 

YES 

NO 

NO 

NO 

24 
25 
26 

EN 

DA= Differentiated appropriations / DNA= Non-Differentiated Appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidate countries from the Western Balkans. 

45 

   EN 

 
 
                                                 
3.2. Estimated impact on expenditure  

3.2.1 Summary of estimated impact on expenditure  

Heading of multiannual financial 
framework:  

1A 

Competitiveness for Growth and Employment 

EUR million (to 3 decimal places) 

DG: MARKT 

(cid:121) Operational appropriations  

12.0404.01. 

12.0404.02. 

Appropriations 
of 
 from the envelop of specific programs27  

administrative 

an 

Commitments 

Payments 

Commitments 

Payments 

(1) 

(2) 

(1a) 

(2a) 

nature 

financed 

TOTAL appropriations 
for DG MARKT 

Commitments 

Payments 

(3) 

=1+1a 
+3 

=2+2a 

+3 

Year 
2011 

Year 
2012 

Year 
2013 

0,881 
0,881 
0,120 
0,120 

1,001 

1,001 

0 
0 
0 
0 

0 

0 

0 
0 
0 
0 

0 

0 

TOTAL 

0,881 
0,881 
0,120 
0,120 

1,001 

1,001 

Heading of multiannual financial 

5 

" Administrative expenditure " 

Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former "BA" lines), indirect research, 
direct research. 

46 

EN 

27 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
framework:  

DG: MARKT 

(cid:121) Human resources  
(cid:121) Other administrative expenditure  

Year 
2011 

Year 
2012 

Year 
2013 

0,488 

0,488 

0,488 

TOTAL DG MARKT 

Appropriations  

0,488 

0,488 

0,488 

TOTAL appropriations 
under for HEADING 5 
of the multiannual financial framework  

(Total 
= Total payments) 

commitments 

0,488 

0,488 

0,488 

TOTAL appropriations  
under HEADINGS 1 to 5 

Commitments 

1,489 

0,488 

0,488 

of the multiannual financial framework   Payments 

1,489 

0,488 

0,488 

Year 
2011 

Year 
2012 

Year 
2013 

EUR million (to 3 decimal places) 

TOTAL 

1,464 

1,464 

1,464 

EUR million (to 3 decimal places) 

TOTAL 

2,465 

2,465 

According  to  Article  48  (1)  c)  of  the  ESMA  Regulation,  the  revenues  of  ESMA  may  also  consist  of  any  fees  paid  to  the  Authority  in  the  cases 
specified in the relevant legislation. Article 19 of the proposal provides that ESMA's expenditure necessary for the registration and supervision of 
CRAs according to the Regulation shall be fully covered by fees charged to the credit rating agencies. The types of the fees, the matters for which 
fees are due and the amount of the fees shall pursuant to Article 19 (2) be determined by a Commission delegated act which will be adopted in the 

EN 

47 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
course of 2011 and is supposed to enter into force beginning of 2012. In the transition year of 2011 resources for direct supervision of CRAs should 
be advanced by Member States and Community contributions according to the ratio foreseen in the draft ESMA Regulation (40 % Community and 
60 % Member States contributions). The costs for CRA supervision in 2011 shall be claimed back from the CRA industry once the delegated act 
entered into force.  

3.2.2 Estimated impact on operational appropriations  

The proposal/initiative requires the use of operational appropriations, as explained below: 

The specific objectives of the proposal are set out under 1.4.2. Given the type of objectives it is not possible to attribute concrete numerical outputs to 
each of them. Still the indicators outlined above will allow assessing whether the objectives of the proposal have been reached.

EN 

48 

EN 

 
  
3.2.3 Estimated impact on appropriations of an administrative nature 

3.2.3.1 Summary  

The proposal/initiative requires the use of administrative appropriations, as explained 
below: 

Year 
2011 

Year 
2012 

Year 
2013 

EUR million (to 3 decimal places) 

TOTAL 

HEADING 5 
of the multiannual 
financial 
framework 

Human resources  

0,488 

0,488 

0,488 

Other administrative 
expenditure  

Subtotal 
HEADING 5 
of the multiannual 
financial 
framework  

0 

0 

0 

0,488 

0,488 

0,488 

TOTAL 

0,488 

0,488 

0,488 

1,464 

1,464 

1,464

3.2.3.2 Estimated requirements of human resources  

The proposal/initiative requires the use of human resources, as explained below: 

Estimate to be expressed in full amounts (or at most to one decimal place) 

Year
2011 

Year
2012 

Year 
2013 

(cid:121) Establishment plan posts (officials and temporary agents) 

XX 01 01 01 (Headquarters and 
Commission’s Representation Offices) 

4 

4 

(cid:121) External personnel (in Full Time Equivalent unit: FTE) 

TOTAL 

4 

4 

4 

4 

Description of tasks to be carried out: 

Officials and temporary agents 

•  Adopt  fining  decisions  and  decisions  on  periodic  penalty  payments 
on CRAs on a proposal by ESMA according to Articles 36 and 36a 
of  the  proposal,  including  own  enquiries,  hearing  of  the  CRAs  and 
persons  concerned,  respond  to  requests  for  access  to  file,  defend 

EN 

49 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
fining  and  periodic  penalty  payments  decisions  before  Courts  and 
collection of fines and periodic penalty payments.  

•  For  2011  all  4  posts  will  be  redeployed  inside  DG  MARKT.  Given 
the  budgetary  constraints  linked  to  the  current  Commission's 
commitment not to ask for new posts until 2013, the human resources 
required will be met by staff from the DG who are already assigned 
to management of the action and/or have been redeployed within the 
DG, together if necessary with any additional allocation which may 
be  granted  to  the  managing  DG  under  the  annual  allocation 
procedure and in the light of budgetary constraints. At least one post 
will  be  redeployed  using  existing  resources  within  the  managing 
service (internal redeployment). 

3.2.4 Compatibility with the current multiannual financial framework  

Proposal/initiative is compatible the current multiannual financial framework. 
Proposal/initiative  will  entail  reprogramming  of  the  relevant  heading  in  the 

(cid:133) 
(cid:58) 
multiannual financial framework. 

New action of the Commission 

Proposal/initiative requires application of the flexibility instrument or revision 

(cid:133) 
of the multiannual financial framework. 

3.2.5 Third-party contributions  

The proposal/initiative provides for the co-financing estimated below: 

Appropriations in EUR million (to 3 decimal places) 

Year 
2011 

Year 
2012 

Year 
2013 

Total 

Specify 
body  

the  co-financing 

60% of total needs by Member 
States, via EU National 
Supervisors (proposed ESMA 
standard financing mechanism) 

No co-financing. CRA 
Supervision fully 
financed via fees 

TOTAL 
cofinanced  

appropriations 

1,501 

0 

0 

1,501 

3.3. Estimated impact on revenue  

(cid:58) 

Proposal has financial implications on revenue. According to the proposal the 
Commission  may  impose  fines  and  periodic  penalty  payments  on  CRAs  (see 
Article  36,  36a).  It  is  difficult  to  predict  the  amount  of  fines  and  periodic 
penalty  payments  that  the  Commission  may  impose  on  CRAs  as  it  depends 
among  other  things  on  the  future  compliance  of  CRAs  with  the  Regulation.

EN 

50 

   EN 

 
 
 
 
ANNEX  to  Legislative  Financial  Statement  for  Proposal  for  Regulation  amending 
Regulation No 1060/2009 on credit rating agencies 

Applied methodology and main underlying assumptions  

The costs related to direct supervision of CRA by ESMA have been estimated according to 
three cost categories: the staff costs, the infrastructure costs and the operations costs, in line 
with  the  classification  in  the  general  draft  budget  of  ESMA  (see  financial  statement 
accompanying  proposal  for  a  regulation  establishing  ESMA  from  23.09.2009  COM(2009) 
503). 

According to current estimations from the CESR secretariat and own Commission estimates 
the  CRA  oversight  activity  will  require  12  new  staff  members  (6  temporary  agents  and  6 
seconded  national  experts)  in  addition  to  the  3  staff  that  are  currently  working  on  CRAs  in 
CESR  and  that  are  covered  by  the  draft  budget for  ESMA  already  provided  for  in  the  draft 
ESMA Regulation.  

The need for increased staffing numbers reflects the new tasks related to direct supervision of 
CRAs which the authority will need to undertake in addition to its previous responsibilities in 
the area of CRAs (e.g. giving advice to the Commission, developing guidelines and binding 
technical standards, facilitate cooperation between national competent authorities, mediation).  

These  new  tasks  are  set  out  in  the  proposed  Regulation  and  further  spelled  out  in  the 
explanatory  memorandum  (4.3.3.  and  4.3.4.).  They  include,  but  are  not  limited  to,  the 
registration of CRAs located in the Community, the certification of smaller CRAs located in 
third countries, day-to-day supervision of registered CRAs, requiring regular contacts with the 
management/  staff  of  the  supervised  entities,  cooperation  with  third  country  supervisors 
regarding  third  country  CRAs,  responding  to  questions,  complaints  or  requests  by  national 
competent  authorities,  CRAs  or  investors,  monitoring  of  the  compliance  of  CRAs  with 
requirements  set  out  in  the  CRA  Regulation,  requesting  information  from  CRAs  or  persons 
involved in rating activities, conducting onsite inspections, examining records and hearing of 
persons on alleged breaches of the Regulation. ESMA will also have the power to withdraw 
the registration and take other supervisory measures as listed in Article 24 of the Regulation 
and  to  request  the  Commission  to  impose  fines  and  periodic  penalty  payments  on  CRAs 
which are in breach of the Regulation, providing evidence about the breach and proposing the 
amount of the fine or the penalty payment. 

According  to  our  information  ca.  50  CRAs  will  apply  for  registration  and  will,  once 
registered, have to be supervised by the ESMA. Taking account of the number of CRAs to be 
supervised,  the  number,  type  and  complexity  of  tasks  to  be  fulfilled  by  ESMA  and  some 
general  indications  about  the  staff  numbers  that  national  competent  authorities  foresee  for 
registration and supervision under the current framework, the number of 12 additional posts 
for CESR is appropriate. 

The  detailed  breakdown  of  estimated  staff  numbers  by  various  categories  is  presented  in 
Table 3. 

The impact of the location of ESMA in Paris has also been taken into account by applying the 
relevant correction coefficient reflecting the costs of living in Paris. 

EN 

51 

   EN 

 
 
The  evolution  of  the  staff  costs  in  subsequent  years  depends  among  other  things  on  the 
number  of  supervised  entities  but  from  today's  perspective  we  would  not  expect  significant 
changes. 

The figures under Title 2 relating  to the cost of infrastructure have been based on the input 
from  CESR  and  Commission  estimates.  The  CESR  provided  estimates  of  their  costs  in  this 
category,  based  on  extrapolation  of  their  real  costs  linked  with  running  offices  and 
administration  in  their  current  locations.  Given  that  Paris  is  among  the  most  expensive 
business locations in Europe, the estimated costs naturally exceed the average levels for the 
EU  regulatory  agencies.  Costs  for  translations  of  registrations  and  other  decisions  will  be 
significant as the EU language regime will fully apply to ESMA. 

New  operation  costs  linked  to  direct  supervision  of  CRAs  relate  to  the  collection  of 
information. This includes the operation of a new database for direct supervision of CRAs. In 
addition, the new ESMA power to undertake onsite inspections requires new resources. 

The methods of calculating the budget of ESMA are presented in Table 2. 

According  to  Article  48  (1)  c)  of  the  ESMA  Regulation,  the  revenues  of  ESMA  may  also 
consist  of  any  fees  paid  to  the  Authority  in  the  cases  specified  in  the  relevant  legislation. 
Article  19  of  the  proposal  provides  that  ESMA's  expenditure  necessary  for  the  registration 
and supervision of CRAs according to the Regulation shall be fully covered by fees charged 
to the credit rating agencies. The types of the fees, the matters for which fees are due and the 
amount of the fees shall pursuant to Article 19 (2) be determined by a Commission delegated 
act which will be adopted in the course of 2011 and is supposed to enter into force beginning 
of  2012.  In  the  transition  year  of  2011  resources  for  direct  supervision  of  CRAs  should  be 
advanced by Member States and Community contributions according to the ratio foreseen in 
the draft ESMA Regulation (40 % Community and 60 % Member States contributions). The 
costs  for  CRA  supervision  in  2011  shall  be  claimed  back  from  the  CRA  industry  once  the 
delegated act entered into force.  

Table 1: Estimated budget for the European Securities and Markets Authority related 
to direct supervision of CRAs  

In thousands € 

Title 1 - Staff costs 

1574,8 

1574,8 

1574,8 

2011 

2012 

2013 

Senior / expert staff: 

Temporary agents 

847,8 

847,8 

847,8 

Seconded national experts 

507 

507 

507 

Administrative  and  other 
support staff: 

Staff benefits 

203,2 

203,2 

203,2 

Staff training: general 

7,2 

7,2 

7,2 

EN 

52 

   EN 

 
  
 
 
 
 
 
 
Expenditure 
staff recruitment 

relating 

to 

9,6 

9,6 

9,6 

-  Building, 
and 

2 

Title 
equipment 
administrative 
expenditure 

Rental  of  buildings  and 
associated costs 

Information 
and 
communication technology 

Movable 
associated costs 

property 

and 

Current 
expenditure 

administrative 

Postage 
Telecommunications 

Meeting 
Travelling expenses 

expenses 

/ 

/ 

Translations 

Title 3 - Operations 

Collection  of  information: 
development  

On site inspections 

628 

628 

628 

216 

216 

216 

72 

12 

12 

36 

180 

100 

300 

150 

150 

72 

12 

12 

36 

180 

100 

300 

150 

150 

72 

12 

12 

36 

180 

100 

300 

150 

150 

TOTAL 

2502,8 

2502,8 

2502,8 

Of  which  Community 
contribution 

1001,12 

Of  which  Member  States 
(national 
contribution 
supervisory  authorities  or 
ministries of finance) 

Fees  and  levy  from  CRA 
industry 

1501,68 

0 

0 

0 

0 

0 

2502,8 

2502,8 

Source: Commission and CESR, estimates and calculations 

Table  2:  Estimated  budget  of  ESMA  related  to  direct  supervision of  CRAs  in  the  first 
year of operation (2011) incl. calculation assumptions 

In thousands € 

EN 

53 

   EN 

 
Title 1 - Staff costs 

Total staff: 

Correction  coefficient 
(cost 
living 
of 
adaptation) 

Paris 

Temporary agents 

Seconded national experts 

6 

6 

Staff benefits 

15% of total staff costs 

Staff training: general 

Average 
amount 
person (COM data) 

per 

Expenditure 
staff recruitment 

relating 

to 

3  candidates 
per post on average 

interviewed 

-  Building, 
and 

2 

Title 
equipment 
administrative 
expenditure 

Rental  of  buildings  and 
associated costs 

CESR data and estimates 

Information 
communication 
technology 

and 

CESR data and estimates 

Movable  property 
associated costs 

and 

CESR data and estimates 

Current 
expenditure 

administrative 

CESR data and estimates 

Postage 
Telecommunications 

/ 

CESR data and estimates 

Travel 
expenses 

and  meeting 

CESR data and estimates 

Translations 

Commission estimates 

Title 3 - Operations 

1574,8

12 

Average annual cost per head 
(based on DG BUDG 
guidelines and 3L3 advice) 

1,158 

141,3 

(122x1,158) 

847,8 

84,5 

(73x1,158) 

0,6 

0,8 

18 

6 

1 

1 

3 

15 

507 

203,2 

7,2 

9,6 

628 

216 

72 

12 

12 

36 

180 

100

300

EN 

54 

   EN 

 
  
 
  
  
  
 
  
 
Collection of information 

Set  up  and  adaptation  of  IT 
systems  (new  system  and 
database 
direct 
supervision of CRAs) 

for 

On site inspections 

CESR estimates 

TOTAL 

Source: Commission and the CESR estimates and calculations 

Table 3: Establishment Plan (preliminary) 

Function group 
and grade 

2011 

2012 

2013 

150

150

2502,8

AD 16  

AD 15  

AD 14  

AD 13  

AD 12  

AD 11  

AD 10  

AD 9  

AD 8  

AD 7  

AD 6  

AD 5  

1 

1 

2 

1 

1 

1 

1 

2 

1 

1 

1 

1 

2 

1 

1 

AD total  

6 

6 

6 

Source: Commission 

EN 

55 

   EN