The European Commission is asking the Committee of European Securities Regulators to review the role of credit rating agencies more closely following the financial market disruptions centred in the structured product area.

At a meeting between EU commissioner Charlie McCreevy and top staff of the CESR, McCreevy expressed the wish to understand several aspects of the rating of structured finance products. These points are set out further in a letter that was given to the CESR at the meeting, as an additional request to review the role of credit rating agencies.

The letter asks the CESR to review whether the IOSCO code for credit rating agencies adequately addresses the potential conflict of interest in issuers paying for ratings, particularly for structured products where the agencies may have more of a role in the manufacturing of products to achieve high ratings. It also seeks more information of the transparency of ratings methodologies, whether the ratings agencies have adequate resources, whether they were slow in revising ratings, and an examination of their compensation policies.

The CESR says it welcomes this added incentive to pursue its work on rating agencies. It had planned to submit its report on the application of the IOSCO Code by rating agencies by April 30, 2008. Following further consideration of the points raised in the letter, the timetable will be reviewed, it said.