ESMA Fines Five Banks for Issuing Credit Ratings Without Authorization
ESMA fined five banks for issuing credit ratings without authorization from ESMA and issued five public notices for these banks negligently breaching the Credit Rating Agencies Regulation (CRAR). These banks are Danske Bank, Nordea Bank, SEB, Svenska Handelsbanken, and Swedbank and they were fined EUR 495,000 each (collectively EUR 2.48 million).
Between June 2011 and August 2016, the five banks issued credit research to their clients—and SEB continued to do so until May 2018. This credit research included the issuance of what the banks described as shadow ratings. These reports related to different entities and underlying financial instruments. These reports included opinions, which ESMA found met the definition of a credit rating provided for by the CRAR. However, no bank had acquired the necessary ESMA authorization to issue ratings and such conduct infringes the CRAR, which requires prior authorization. The individual fine amounts take into account the aggravating factor that the banks had committed the infringement for more than six months but also consider the mitigating factor that each bank has voluntarily taken measures to ensure that similar infringements could not be committed in the future. The five banks mentioned above may appeal against this decision to the Board of Appeal of the ESAs. Such an appeal does not suspend the fine, although it is possible for the Board of Appeal to suspend the application of the decision in accordance with the CRAR.
Under the CRAR, issuing credit ratings requires authorization by ESMA to ensure that such ratings are independent, objective, and of adequate quality and that Credit Rating Agencies (CRAs) are subject to the same rules and oversight across all EU countries. A firm, to be registered as a CRA in EU, needs to provide proof that it fulfills the necessary organizational requirements and provides adequate safeguards, in particular regarding governance, conflicts of interests, internal controls, rating process and methodologies, business activities, and disclosures. A failure by a firm to apply for registration prior to issuing ratings is an infringement of the CRAR. None of the five banks was, or is, registered as a CRA nor had they applied for registration. Currently, there are 27 CRAs authorized by ESMA to issue credit ratings within the EU.
Related Links
Keywords: Europe, EU, Banking, CRA Regulation, CRA, Enforcement Decisions, ESMA
Previous Article
ESMA Updates Q&As on the Application of UCITS Directive and AIFMDRelated Articles
|
News
BCBS Publishes Results of Survey on Proportionality in Bank RegulationBCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision.
March 19, 2019
WebPage
Regulatory News
|
|
News
US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy SwapsUS Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule.
March 19, 2019
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: Third Update for March 2019EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.
March 15, 2019
WebPage
Regulatory News
|
|
News
OCC Updates Recovery Planning Booklet of the Comptroller's HandbookOCC updated the Recovery Planning booklet of the Comptroller’s Handbook.
March 15, 2019
WebPage
Regulatory News
|
|
News
EBA Publishes Report on Convergence of Supervisory Practices Across EUEBA published annual report on the convergence of supervisory practices in EU.
March 14, 2019
WebPage
Regulatory News
|
|
News
CPMI-IOSCO Publish Update to Level 1 Assessment of PFMI ImplementationCPMI and IOSCO jointly updated the Level 1 Assessment Online Tracker on monitoring of the implementation of the Principles for financial market infrastructures (PFMI).
March 14, 2019
WebPage
Regulatory News
|
|
News
Agustín Carstens of BIS Speaks About New Role of Central BanksWhile speaking at the 20th anniversary conference of the Financial Stability Institute (FSI), Agustín Carstens, the General Manager of BIS, highlighted the need for regulatory actions in light of the continued evolution of financial technology.
March 14, 2019
WebPage
Regulatory News
|
|
News
ESMA Analyzes Impact of Regtech and Suptech for Markets and RegulatorsESMA published the results of its analysis of the regulatory and supervisory technologies—also known as regtech and suptech—being developed in response to various demand and supply drivers in the financial sector.
March 14, 2019
WebPage
Regulatory News
|
|
News
PRA Publishes Policy Statement on Group Supervision Under Solvency IIPRA published a policy statement (PS9/19) that provides feedback on responses to the consultation paper CP15/18 and the final supervisory statement SS9/15 (Appendix) on group supervision under Solvency II.
March 14, 2019
WebPage
Regulatory News
|
|
News
ECB Announces Start Date for Euro Short-Term RateECB announced that it will start publishing the euro short-term rate (€STR) as of October 02, 2019, reflecting the trading activity of October 01, 2019.
March 14, 2019
WebPage
Regulatory News
|
