Bloomberg reports that the European Commission (EC) will deem that Canada, Brazil, Singapore, Argentina, and Australia don’t regulate credit rating agencies with the same rigor as the EU, a decision that would withdraw some market access rights of the country, according to a document cited by the Financial Times.
This would remove a status that makes it possible for European banks to rely on the ratings and marks. This will be the first time that the access rights have been withdrawn, though temporary permissions for Switzerland were allowed to lapse earlier.
the first time that the access rights have been withdrawn. Credit rating agencies can try a different method, such as endorsement, to allow individual agencies to get access by setting up units in the EU that vouch for ratings produced elsewhere.
Head of European compliance at Dominion Bond Rating Service (DBRS) told the Financial Times that the EC decision to repeal equivalence for Canada will have no impact on the agency’s business.
According to FT, about 40 equivalence provisions are scattered throughout different EU financial regulations and are intended to make sure that trading platforms, brokers and other companies based in non-EU financial centres can serve European clients, so long as they are subject to strong regulation and supervision. The provisions are used by more than 30 countries.
Valdis Dombrovskis, the EU commission vice-president in charge of financial regulation, told the FT that the decision on rating agencies set “some kind of a precedent for monitoring adherence”.
“We had extensive dialogue with those countries, so they knew there was an issue and they knew there may be consequences,” he said.