The European Parliament Thursday voted in favour of adopting new regulations for credit rating agencies.

Under the new rules, credit rating agencies will be required to register with the Committee of European Securities Regulators, and they will be subject to oversight. Registered credit rating agencies will have to comply with rules regarding conflicts of interest, ratings quality, and transparency. The new rules are largely based on the standards set in the International Organisation of Securities Commissions code.

In response to the new rules, Moody’s Investors Service issued a statement saying, “We are closely studying the regulation and are committed to working constructively with the Committee of European Securities Regulators and other regulatory authorities for guidance on its implementation. Moody’s will be taking the necessary steps to be in compliance with the regulation according to the timetable established. We are hopeful that its implementation will contribute to confidence in the quality, consistency and transparency of credit ratings globally.”

Fitch Ratings said that over the past 18 months it “has focused on a variety of analytical and organizational efforts aimed at improving the reliability and transparency of its rating process. These new regulations are consistent with the spirit of these efforts.”

“The new regulation includes additional rules, the majority of which are similar to steps Fitch was already taking, confirming support for the direction in which Fitch is heading. For example, the new rules make reference to the separation of business and credit, the publication of transparent research and criteria and the review of data quality. Fitch has revised or introduced numerous processes and procedures that are consistent with these rules,” it says.

It also notes that there are certain provisions in the new regulation that require further clarification “including the form and type of disclosure required for data related to structured finance transactions and the specific types of data quality checks expected of the credit rating agencies. In addition, while Fitch acknowledges the value of analyst rotation, certain rules requiring such rotation may need to be clarified to prevent the unintended loss of analytical expertise from the rating process and the resulting potential deterioration in the quality of ratings.”

IE