OREANDA-NEWS. The European Association of Credit Rating Agencies (EACRA) held a general meeting in Istanbul on 26-27 September 2013. RusRating, a member of the organisation, was represented by Managing Director Andrei Zhuravlyov.

Meeting participants discussed new Europe-wide norms regulating the operations of rating agencies. Concern was expressed that these norms, far from helping to make ratings more reliable, could serve to limit competition and reduce the potential of ratings to serve as an instrument for managing risks. In particular the European Securities and Markets Authority (ESMA), by insisting that ratings from different agencies be tied to a common scale, is overlooking the fact that this will encourage investors to apply ratings mechanically, ignoring the definition of default adopted by a particular agency. This sits poorly with a call by the G20 to make rating users more responsible for their investment decisions. In any case EACRA meeting participants agreed that no formal standardisation of ratings is possible until agencies reach a preliminary consensus on their theoretical basis.

Meeting participants also agreed to call on ESMA to clarify its position with respect to preliminary ratings (or, as they are called in Russia, “express ratings”). The proposed requirement to make such ratings public is aimed at liquidating “rating shopping”, i.e. the search for the highest possible rating at the lowest possible cost. The lack of clarity surrounding this issue could, however, leave rating agencies faced with additional non-constructive regulatory burdens.

EACRA supports a proposal by the regulator that would require any issuer or instrument that has already be rated by a member of the “Big Three” (Standard & Poor's, Moody's and Fitch) to acquire a second rating, if desired, from an independent credit rating agency.

The Association's next general meeting will be held on 3-4 April 2014 in Granada.