32009R1060

WHAT IS THE AIM OF THE REGULATION?

• Regulation (EC) No 1060/2009 seeks to regulate the activity of credit rating agencies to protect investors and European Union (EU) financial markets against the risk of malpractice.
• Its aim is to guarantee the independence and integrity of the credit rating process and to improve the quality of the ratings issued.
• It lays down conditions for the issuing of credit ratings and rules on the organisation and conduct of credit rating agencies, including their shareholders and members, to promote:
  • credit rating agencies’ independence;
  • the avoidance of conflicts of interest; and
  • better consumer and investor protection.
• The regulation also contains common rules laying down obligations for issuers and related third parties established in the EU regarding securitisation¹ instruments.

KEY POINTS

Registration, rules of conduct and supervision

To be registered in the EU, credit rating agencies must:

• avoid conflicts of interest: for example, credit rating analysts must not rate an organisation in which they have a holding;
• ensure the quality of their ratings and rating methods;
• ensure a high degree of transparency: for example, by publishing an annual transparency report.

Since July 2011, the European Securities and Markets Authority (ESMA) has been responsible for registering credit rating agencies and has exclusive supervisory powers in relation to such agencies.

Over-reliance on credit ratings

• Directive 2013/14/EU amended the regulation to require financial institutions and investors to carry out their own evaluation of credit risks, and not to rely solely or automatically on external ratings in order to evaluate the creditworthiness of an organisation or financial instrument.

Ratings of the sovereign debt of EU Member States

• Credit rating agencies must set up a schedule of dates on which they will rate Member States; Member States will be rated at least every 6 months.
• To avoid market disruption, ratings may only be published after EU stock exchanges have closed, and at least 1 hour before they reopen.
• Investors and Member States must be informed of the facts and assumptions behind each rating.

Responsibility of credit rating agencies

• A credit rating agency may be held liable if it infringes the regulation, either intentionally or through gross negligence, thereby causing damage to an investor or an issuer.

Independence and preventing conflicts of interest

• A rotation rule requires issuers of complex securitisation instruments to change agency every 4 years.
• Credit rating agencies must disclose situations in which a shareholder holds 5% or more of the agency’s capital or voting rights and 5% or more of an organisation rated by that agency. If both these holdings reach or exceed 10%, the credit rating agency is not entitled to rate the entity.
• It is forbidden to hold 5% or more of the capital or voting rights of more than one credit rating agency, unless these agencies belong to the same group.

European single access point

Amending Regulation (EU) 2023/2869 incorporates within Regulation (EC) No 1060/2009 a new article concerning the accessibility of information about the European single access point (ESAP), established under Regulation (EU) 2023/2859 – see summary. The ESAP will provide access to public financial and sustainability-related information about EU companies and EU investment products. From 10 January 2028, when making public certain information required under Regulation (EC) No 1060/2009, in particular the information related to the ratings and to the methodologies, models and key assumptions used in the credit activities, credit rating agencies will need to submit that information at the same time to the relevant collection body for the purpose of making it accessible on the ESAP. The amending regulation also sets out the conditions (in the context of the digitalisation of the information) with which that information must comply.

All available ratings are published on the European Rating Platform by the European Securities and Markets Authority.

The ESAP regulation specifies that the ESAP may, in the future, fulfil the functions of the European Rating Platform.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 7 December 2009, with the exception of rules on:

• references to credit ratings in prospectuses (Article 4(1)), which have applied since 7 December 2010; and
• credit rating agencies established in non-EU countries (Article 4(3)(f), (g) and (h)), which have applied since 7 June 2011.

BACKGROUND

The EU regulation on credit rating agencies is one of the initiatives taken by the EU in response to the commitments made at the G20 Washington Summit in November 2008.

For further information, see:

• Credit rating agencies (European Securities and Markets Authority)
• Regulating credit rating agencies (European Commission).

KEY TERMS

1. Securitisation. Transactions that enable a lender or other originator of assets – for example, a credit institution – to refinance a set of loans or assets (e.g. mortgages, car leases, consumer loans, credit cards) by converting them into securities. The lender or originator organises a portfolio of its loans into different risk categories, tailored to the risk-versus-reward requirements of investors. Returns to investors are generated from the cash flows of the underlying loans.

MAIN DOCUMENT

Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, pp. 1–31).

Successive amendments to Regulation (EC) No 1060/2009 have been incorporated into the original document. This consolidated version is of documentary value only.

RELATED DOCUMENTS

Regulation (EU) 2023/2859 of the European Parliament and of the Council of 13 December 2023 establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability (OJ L, 2023/2859, 20.12.2023).

See consolidated version.

Report from the Commission to the European Parliament and the Council on alternative tools to external credit ratings, the state of the credit rating market, competition and governance in the credit rating industry, the state of the structured finance instruments rating market and on the feasibility of a European Credit Rating Agency (COM(2016) 664 final, 19.10.2016).

Commission Delegated Regulation (EU) 2015/1 of 30 September 2014 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards for the periodic reporting on fees charged by credit rating agencies for the purpose of ongoing supervision by the European Securities and Markets Authority (OJ L 2, 6.1.2015, pp. 1–23).

Commission Delegated Regulation (EU) 2015/2 of 30 September 2014 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards for the presentation of the information that credit rating agencies make available to the European Securities and Markets Authority (OJ L 2, 6.1.2015, pp. 24–56).

Report from the Commission to the Council and the European Parliament on the feasibility of a network of smaller credit rating agencies (COM(2014) 248 final, 5.5.2014).

Directive 2013/14/EU of the European Parliament and of the Council of 21 May 2013 amending Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision, Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) and Directive 2011/61/EU on Alternative Investment Funds Managers in respect of over-reliance on credit ratings (OJ L 145, 31.05.2013, pp. 1–3).

See consolidated version.

Commission Delegated Regulation (EU) No 272/2012 of 7 February 2012 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to fees charged by the European Securities and Markets Authority to credit rating agencies (OJ L 90, 28.3.2012, pp. 6–10).

Commission Delegated Regulation (EU) No 447/2012 of 21 March 2012 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council on credit rating agencies by laying down regulatory technical standards for the assessment of compliance of credit rating methodologies (OJ L 140, 30.5.2012, pp. 14–16).

Commission Delegated Regulation (EU) No 449/2012 of 21 March 2012 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards on information for registration and certification of credit rating agencies (OJ L 140, 30.5.2012, pp. 32–52).

Commission Delegated Regulation (EU) No 946/2012 of 12 July 2012 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to rules of procedure on fines imposed to credit rating agencies by the European Securities and Markets Authority, including rules on the right of defence and temporal provisions (OJ L 282, 16.10.2012, pp. 23–26).