Treasury Associations Provide Input into CESR’s Possible Measures to Regulate Credit Rating Agencies

The Association of Corporate Treasurers (“ACT”) and of the Association Française des Trésoriers d’Entreprises (“AFTE”) have submitted a joint response to the Committee of European Securities Regulators’ consultation paper over its technical advice to the European Commission on possible measures concerning credit rating agencies (“CRAs”) issued in November 2004.

CESR was asked by the Commission to look at a possible registration system for CRAs in connection with barriers to entry to the ratings industry and secondly to consider codes of conduct. From this analysis it was asked to recommend any strategic policy measures to deal with the issues raised.

Principal comments

• The ACT and AFTE believe that CESR is right to acknowledge the importance of the Code Fundamentals recently published by the International Organisation of Securities Commissions. They do however believe that a limited number of amendments to the Code Fundamentals will eventually be necessary to fully address some of their concerns.
• We believe that the IOSCO code should be allowed to bed in for a couple of years before any additional provisions by way of registration requirements or regulations are introduced.
• If, in the event, any form of registration or compliance filing is considered necessary for a CRA, we believe that a single such registration or filing should meet all compliance obligations throughout the EU for any legal entity.
• We consider the market to be the best regulator of CRAs, and that this can be assisted by the adoption by the industry of a suitable code of conduct.

Richard Raeburn, Chief Executive at the ACT said:

 Treasury associations – who represent rated issuers – and most other commentators to CESR have supported no, or very light, regulation of credit rating agencies. It is essential that variation in the regime affecting CRAs around the world is avoided. While IOSCO’s work helps in this, restraint by local or regional securities regulators is important. The market is the best regulator here, and tools like an industry code of conduct such as that proposed by international treasury associations last year can help in the process. Richard Raeburn, Chief Executive at the ACT

Notes to editors

1. The Association of Corporate Treasurers, together with the Association Française des Trésoriers d’Entreprises in France and the Association for Financial Professionals in the USA, with the support of the International Group of Treasury Associations and the European Associations of Corporate Treasurers published an exposure draft of a Code of Conduct for Participants in the Credit Rating Process in 2004. A final version of this will be published shortly following the publication of the IOSCO Code Fundamentals.

2. CESR’s 30.11.2004 consultation paper to which the ACT and AFTE have responded is available at www.cesr-eu.org (and follow the consultations link).

3. IOSCO’s Code of Conduct Fundamentals for Credit Rating Agencies is available at www.iosco.org/news/pdf/IOSCONEWS79.pdf.

4. For further information on the ACT or to commission an article from the ACT, please visit the ACT Press Room.

Association Française des Trésoriers d'Entreprise (AFTE) - www.afte.com

Association Française des Trésoriers d'Entreprise (AFTE), founded in 1976, represents more than 1,400 members, including 1,050 Corporate Treasurers or Financial Managers of approximately 900 industrial and commercial companies; 450 members are based in the provinces. There are also 350 correspondent members. Its development is concentrated on five activities: technical committees, conferences, education, publications and representation of corporate treasurers. AFTE is a founding member of the Euro Associations of Corporate Treasurers (EACT).

The AFTE contact on this issue is:

Patrice Tourlière
Treasury and Finance Manager, Lafarge
T: + 33 (0) 1 44 34 11 64
E: patrice.tourliere@lafarge.com