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Credit rating agencies can still access EU market: MAS

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This comes after European Commission strips five countries, including S'pore, of some market access rights

Credit rating agencies in Singapore are not expected to have their business affected by the European Commission's decision to strip five countries of some market access rights, the Singapore authorities said yesterday.

The European Commission confirmed it has deemed that Argentina, Australia, Brazil, Canada and Singapore no longer regulate credit rating agencies as rigorously as the European Union does.

It is therefore removing a status that made it possible for European banks to rely directly on those ratings for the issuance of bonds, loans and other debt instruments.

This is the first time that such access rights - called equivalence provisions - have been withdrawn, although some temporary permissions for Switzerland were allowed to lapse earlier this year.

But the Monetary Authority of Singapore (MAS), which regulates the four credit rating agencies here, said agencies here will continue being able to access the EU market through a separate endorsement regime, which they already operate under.

"Under this regime, ratings issued by credit rating agencies in Singapore are endorsed by their related entities in the EU, and can continue to be recognised and used for regulatory purposes in the EU," MAS added.

The four agencies here are: Standard and Poor's, Fitch Ratings, Moody's and AM Best Asia Pacific.

Equivalence means the EU Commission recognises that the financial regulatory or supervisory regime of certain non-EU countries is equivalent to the corresponding EU framework.

EU financial services law includes around 40 areas for equivalence decisions. The aim, said the Financial Times, is to ensure that trading platforms, brokers and other companies based in non-EU financial centres can serve European clients as long as they undergo strong regulation and supervision.

MAS, however, noted that even as Singapore's regime for rating agencies no longer has equivalence status, the Republic continues to be on the list of countries that the European Securities and Markets Authority has deemed as meeting the legal and supervisory framework for the endorsement regime.

CIMB Private Banking economist Song Seng Wun said the EU move is a timely reminder for businesses to follow all EU rules.

"It's about amending or adhering to the rules, then showing the EU bureaucrats that we are compliant," he said.