ESMA calls for legislative changes to improve access to and use of credit ratings

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published an Opinion on how access to and use of credit ratings can be improved in the EU. In the Opinion ESMA highlights the difficulties experienced by users of credit ratings and recommends that the legislators amend the CRA Regulation or take alternative legislative action to address these.

Credit ratings are published on Credit Rating Agencies’ (CRAs’) websites as well as on the European Rating Platform (ERP). However, the usability of these credit ratings is severely limited as they cannot be accessed in a machine-readable format or downloaded in sufficient numbers to be used for regulatory purposes.

In practice, users mainly access and use credit ratings and related research reports through licences for data feeds and platform services offered by other companies in CRAs’ groups. These companies are not currently subject to regulation and their licencing practices and the high fees charged raise both investor protection and competitiveness concerns.

Users of credit ratings have reported that the terms of the licence agreements they must enter into to use credit ratings are subject to frequent changes and that they often need to enter into additional licences in order to maintain a consistent level of data usage over time. Users also report an inability to negotiate the terms of access to data feeds and a lack of transparency in price increases.

ESMA concludes that legislative changes are needed to improve access to and use of credit ratings and highlights that these could be implemented through changes to the CRA Regulation or through the adoption of alternative legislation.

Next steps

The Opinion has been prepared by ESMA of its own initiative and submitted to the EU institutions for consideration by the legislators. The Opinion is the culmination of ESMA’s thematic work on Fees Charged by CRAs and Accessibility and Use of Credit Ratings. It draws on the findings of ESMA’s 2018 Thematic Report, 2019 Follow-up Report and 2020 Call for Evidence.