EU Fines Moody’s for its Credit Rating of EU Financial Bodies

For the EU it seems that if you don't like the message, fine the messenger.

The European Securities and Markets Authority (ESMA) announced today that it has fined the credit rating agency Moody’s €1.24 million for what it describes as two CRAR (Credit Rating Agencies Regulation) credit ratings breaches.

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ESMA says that it found that Moody’s Germany and Moody’s UK negligently committed two infringements of the CRAR regarding their public announcement of certain ratings and their public disclosure of methodologies used to determine those ratings.

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These alleged failures concern nineteen ratings issued between June 2011 and December 2013 for nine supranational entities including the European Investment Bank, the European Investment Fund, the European Stability Mechanism, the European Financial Stability Facility and the European Union.

Giving countries a rating that they do not like can always be a sensitive issue for agencies of course. When Moody’s lowered China’s long term currency issuer ratings last week the Chinese Ministry of Finance also claimed that the organization used an “inappropriate” method.

Moody’s breaches of the CRA Regulation according to ESMA:

The public announcement of the nineteen ratings issued by Moody’s Germany and Moody’s UK between June 2011 and December 2013 included no other material sources of public information than press releases. These failed to indicate the principal methodology used for the ratings decisions and failed to refer to any comprehensive descriptions of the methodology used.

The methodology used in each of the nineteen ratings issued by Moody’s Germany and Moody’s UK between June 2011 and December 2013 was not the subject of any separate public disclosure either before or after the public rating announcements. This Infringement continued for more than six months.

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