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    MAS Clarifies Decision of EC to Repeal Equivalence Status for CRAs

    September 03, 2019

    MAS published its reply to the Parliamentary questions on the EC decision to repeal equivalence status for credit rating agencies (CRAs) in Singapore. Some media reports might have given the impression that EC is reducing its market access to financial institutions in Singapore. Tharman Shanmugaratnam, a Senior Minister and Minister in charge of MAS, explained that the EC decision covers only CRAs, for which it still allows the use of endorsement approach, and does not extend to any other financial services.

    Furthermore, EC recognizes CRAs in a third country through two approaches. First, deeming the third country’s CRA rules as equivalent to EC rules, which is called the equivalence decision. Second, an endorsement approach, where the CRAs in the third country rely on their related entities in EU to endorse their ratings. CRAs in Singapore have been using the endorsement approach and EC has confirmed that it will continue to recognize Singapore-based CRAs using this approach.

    The CRA regulatory regime of MAS is based on, and consistent with, the standards promulgated by IOSCO. EC has assessed the CRA regulatory regime of MAS to be less prescriptive than EU rules in certain areas, such as in defining specific situations in which a conflict of interest for the CRA arises. MAS takes a more principles-based approach. It nevertheless requires conflicts of interest to be effectively addressed and is fully in line with international standards. Mr. Shanmugaratnam highlighted that Singapore is in good standing with EU. MAS will continue to closely engage its EU counterparts in reviewing the rules to ensure that financial institutions in Singapore continue to have access to the EU market in various financial services.

     

    Keywords: Europe, EU, Asia Pacific, Singapore, Banking, Securities, CRAs, Credit Ratings, Equivalence Decisions, Endorsement Regime, EC, MAS

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