The Committee of European Securities Regulators today announced that they have begun a dialogue with the credit rating agencies to review how the code of conduct proposed by the International Organization of Securities Commissions is being implemented.

Back in March, at the request of the European Commission, the CESR advised on potential options to regulate credit rating agencies. In its advice, the CESR proposed not to regulate the CRAs for the time being, instead it proposed that a pragmatic approach should be adopted to keep under review how CRAs would implement the standards set out in the IOSCO Code of Conduct.

The CESR intends to develop this strategy on the basis of voluntary participation from the CRAs. In addition, it will continue to monitor developments related to CRAs and issues impacting investors and issuers.

The committee has discussed the process to review implementation of the IOSCO code with Moody’s and Standard and Poor’s and has outlined a voluntary framework of co-operation between CESR and CRAs. This framework includes three elements: an annual letter from each CRA will be sent to the CESR, and will be made public, outlining how it has complied with the IOSCO Code and indicating any deviations from the Code; an annual meeting between the CESR and the CRAs will also be organized to discuss any issues related to implementation of the IOSCO Code; and, the CRAs would provide an explanation to the national CESR member where any substantial incident occur with a particular issuer in its market.