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EU watchdog tightens grip over use of foreign credit ratings

Staff Writer |
The European Union's markets watchdog has tightened its grip over the use of credit ratings compiled outside the bloc.

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This is a taste of what the "Big Three" ratings agencies in London face after Brexit.

For a credit rating compiled outside the EU to be used for regulatory purposes in the bloc, it must be "endorsed" by a credit rating agency authorised by EU's European Securities and Markets Authority or ESMA.

More than two thirds of credit ratings that can be used for regulatory purposes in the EU are introduced through the endorsement regime. Nearly all endorsed credit ratings relate to non-EU issuers and financial instruments, it said.

ESMA on Friday updated its rules on endorsement that will come into force in January 2019, spelling out how it will be more interventionist in policing the regime.

"The updated guidelines make clear that ESMA can, and will, exercise its powers to request information from EU credit rating agencies about endorsed credit ratings," ESMA Chair Steven Maijoor said in a statement.

The changes to the rules puts more onus on the EU based rating agency to "demonstrate" that the conduct of the non-EU rater "fulfils requirements that are at least as stringent as the EU requirements".

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