Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-12-14-Speech-2-513"
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"en.20101214.37.2-513"2
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"Mr President, as a Vice-Chair of the Committee on Legal Affairs, I would like to present some important aspects that were the subject of the debates and amendments tabled in this committee.
Firstly, at the present time, payment for the structured instruments evaluated by the agencies is made by the issuing company. There can be conflicts of interest because the rated companies are interested in having a good rating. Alternatively, it might be the users of ratings who pay. The users’ interests are more diverse and therefore, there is not a single interest that can lead to a conflict of interest. There are users who prefer a good rating, for instance, when they want to sell shares, and those who prefer a bad rating, for instance when they want to buy shares.
Secondly, the regime for the rating agencies could profit from the rules that have been established for the auditors. The rating agencies and auditors have a lot of responsibility for the good reputation of companies and the proper functioning of the market. Auditors, however, seem to be subject to far stricter rules than the rating agencies.
Thirdly, the European Securities and Markets Authority, ESMA, should have supervisory competence over the credit rating agencies in order to verify possible material discrepancies between the ratings given by different agencies for the same structured financial instrument. ESMA should also have greater power of enforcement.
Fourthly, the directive introduces a new principle, taken from the latest US legislation. When an agency other than the one contracted to make the valuation can do its valuation for the same instrument, it is subject to the contracted valuation. For this, the first agency must disclose certain information regarding the valuated instrument. In such a way, two beneficial effects are obtained – firstly, there is a second opinion and, secondly, the liability that falls on the contracted agency is reduced.
Finally, I want to underline the fact that the provisions of this directive, which represents a new regulatory frame, should only apply to the structured financial instruments, credit rating agencies themselves being an important part of structured finance. The remainder of the financial instruments, 150 year-old common shares or plain bonds which do not pose a systemic risk should not be part of this directive if you want to be tight but not to over-regulate, if you want to be competitive but not expensive in administrative costs, and if you want to hold capital in Europe and not drive it away to the emerging markets abroad."@en1
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