* EU banks relieved U.S. ratings approved for use
* Ratings from Mexico, Argentina, Brazil may face curbs
By Huw Jones
LONDON, March 15 The European Union's
markets watchdog said on Thursday it would allow the continued
use of U.S. credit ratings in the 27-nation bloc as regulators
tighten scrutiny of a sector partly blamed for the financial
The decision is a relief for banks in Europe, large users of
ratings from the United States, which feared big costs from
having to find alternative ratings for calculating their
regulatory capital buffers.
The European Securities and Markets Authority (ESMA) said it
had ruled that the regulatory regime for credit rating agencies
in the United States, as well as Singapore, Canada and Hong
Kong, are in line with rules in the EU.
The ruling was necessary for the continued use of ratings
from those countries in the EU after an April 30 cut-off date.
Ratings from Japan and Australia had already been approved.
"By allowing EU-registered credit rating agencies to endorse
credit ratings issued by credit rating agencies based in the
USA, Canada, Hong Kong and Singapore, ESMA today takes a major
step towards the international convergence of credit rating
agencies' oversight," ESMA Chairman Steven Maijoor said in a
Mark Bearman, a director at the Association for Financial
Markets in Europe, a banking lobby, said the ruling will avoid
the potential for multiple increases in capital requirements at
banks, which are calculated using ratings.
"The inability of banks to use ratings from these
third-country jurisdictions could also have led to increased
concentration risks, unintended consequences for the management
of liquidity and the non-viability of some business models, so
this is good news for the industry and alleviates much of the
impending market disruption," Bearman said.
AFME would also like the green light for ratings from
Mexico, Brazil and Argentina, which still face an end of April
ESMA said it was working, where possible, to finalise its
assessments of regulatory regimes in the three countries.
"However, it is currently not possible to anticipate whether
this can be finalised for all of the three countries... by that
deadline," ESMA said.
World leaders agreed in 2009 to force rating agencies to
obtain authorisation and undergo direct supervision.
It was part of a crackdown on the sector which was
criticised for giving high ratings to products based on
sub-prime U.S. home loans that defaulted and helped to spark the
global financial crisis.