The need to define a complete Regulation relating to the rating activity led the European regulator to a further enactment of two regulations: Regulation (EU) 513/2011 and Regulation (EU) 462/2013 that amend and integrate the discipline brought by the mentioned Regulation (CE) No. 1060/2009. 11
The Regulation (EU) 513/2011 imposed an accurate registration and ongoing supervision system for the credit rating agencies oper- ating in the territory of the community. The competent authority in the field is represented by ESMA (established following the enact- ment of Regulation (EU) No. 1095/2010 of the European Parliament
and of the Council), which – on the basis of Art. 15 of the said Regulation (CE) No. 1060/2009, as amended by the subsequent deci- sion of 2011 – examines applications for the admission to the regis- tration procedure, decide on the possible acceptance or rejection and updates the list of agencies authorized to operate on European territory.
In addition, the regulations in question gives ESMA the power to request information and carry out investigations concerning credit rating agencies, addressing to any individual involved in the certifi- cation of creditworthiness, “to rated entities and related third parties, as well as to third parties to which the credit rating agencies have outsourced operational functions or activities” (Art. 23-ter and Art. r 23-quater). In addition, the provision of specific inspection and sanc-r tioning powers for the same authority, which may decide to revoke (or temporarily suspend) the record of a determined agency when the latter engages violations of behavioural, strategic and opera- tional nature of particular gravity, regularly listed in Annex III to the appointed Regulation (EU) 513/2011.
Turning to the Regulation (EU) 462/2013, it must be noted that this last disciplinary intervention focuses on some specific rating aspects and integrates the Regulation (CE) No. 1060/2009 for what concerns certain issues that have recently emerged in the agencies’
agere. Indeed, the supranational regulator has placed the focus on the management of conflicts of interest on the part of the raters, on the information on the structured finance products, as well as on methods of processing ratings on sovereign debt. This is in view of greater integrity, transparency, accountability, fairness and manage- rial independence of the agencies. 12
The regulations introduces an obligation of “rotation” of the specialized agencies responsible for assessing the re-securitization operations carried out by the same assignor. The time limit estab- lished by the legislator is four years; it affects the duration of the contractual relationship between the issuer and the rater in order to prevent that the persistence of long-lasting relationships negatively affects the accuracy of the ratings.
It is clear that the underlying reason for this rule is to be found in the intent to prevent the occurrence of situations of dubious imparti- ality (operational and decision-making) in the head of the agency; an impartiality arising from the existence of relationships characterized
by excessive closeness between the negotiating parties may result in forms of involvement of additional interests (third and misleading).
If we consider well, the rotation obligation can generate potential benefits in the context of the entire rating market; that both in terms of increased competition and to minimize the effect of lock-in in the hands of the customers, which – as is pointed out in the legislation – usually “refrains from changing the credit rating agency for fear that (such decision) would raise concerns among investors about its cred- itworthiness” (considering No. 12 of the regulation under examina- tion). Not to be overlooked is the fact that the rotation at regular intervals, of the relationships between operators and agencies allows, in our view, even the small agencies to maintain contractual relation- ships with various categories of issuers while avoiding the negative effects of excessive loyalty to a single company.
Finally, the specific regulatory focus reserved by the European legis- lator for the subject of unsolicited rating on sovereign debt should be noted. Not surprisingly, Art. 8 bis of Regulation (EU) 462/2013 constrains agencies to define a preventive programme of activities, in which the same are required to identify the exact timing of the issu- ance of opinions (limited by the European regulator to a maximum of three annual publications). It also points out the limits encountered by ESMA – in carrying out its supervisory functions – with regard to the reliability of the assessments carried out by analysts. Not surprisingly, the authority in question – in a recent report (credit rating agencies, Sovereign ratings investigation, ESMA’s assessment of governance, conflicts of interest, resourcing adequacy and confidentiality controls, ESMA/2013/1775) in the field of validity of sovereign ratings – has highlighted the persistence of gaps (organizational and managerial) that significantly influence the judgements, undermining the basis of the substantial utility of the same at the time of their publication.
This suggests that the business segment for opinions on sovereign debt is still the focus of the doctrinal and normative debate; this is because, despite the constraints imposed by the European regulation, the operation in question is still oriented toward the satisfaction of the interests of dubious fairness and effectiveness.
To these, the critical issues relating to the identification of an appropriate system of liability of the raters, which is activated in case of market penetration of distorted judgements must be added.
Regulation (EU) No. 462/2013 has tried to find a remedy for this,
although achieving results of questionable effectiveness in terms of the protection of the investor.