The European Associations of Corporate Treasurers (EACT), responding to a Commission Services consultation, has called for radical changes to the proposed European regulation of credit rating agencies (CRAs). The key points made by the EACT include: 1) Credit ratings in the more traditional sovereign and corporate sectors have not been a problem. Problems have arisen in relation to structured finance instruments and from some users’ misunderstanding of what credit ratings are. 2) The proposals take a fixed, narrow view of ratings, not recognising the existing and potential variety in size and type of credit rating agency with varying outputs, methods and relationships with interested parties. 3) Given the global nature of many financial markets, issuers and investors, the proposals pay insufficient attention to wider international aspects and extra-territorial effects. 4) The Commission should consider more fully and at length the consequences of the current proposals and not legislate in haste. Olivier Brissaud, chairman of the EACT commented: “Our members are concerned that the proposed Directive would increase the cost of capital for EU-based companies. Rather than limited, principles-based regulation the draft is often more like attempted micro-management. It risks raising costs, freezing competition and stopping innovation in credit ratings services.”
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