European watchdog warns credit rating agencies over fees

[January 11, 2018]   By Marc Jones

LONDON (Reuters) - Europe's financial markets watchdog criticized top credit rating agencies like S&P Global <SPGI.N >, Moody's <MCO.N> and Fitch on Thursday, saying they were not providing enough clarity on the fees they charge.

The European Securities and Markets Authority (ESMA) said it was sometimes unable to understand the key elements of agencies' fee 'schedules' and why they sometimes deviated from them or increased or cut their prices.

"ESMA has found that there are areas for significant improvement by both credit rating agencies (CRA) and trade repositories (TR) in their current fee practices," ESMA's chairman Steven Maijoor said.

He added the Paris-based watchdog would give "supervisory priority to the issues identified".

It wants them to provide clearer explanations and transparency on the fee-setting process as well as how sister companies that provide supplementary ratings-related services, such as bulk provision of ratings data, set their prices.

ESMA said there was no apparent link between the fees that were charged and the costs involved in actually calculating and providing the rating.

Steven Maijoor, Chair of European Securities and Markets Authority, addresses the Asian Financial Forum in Hong Kong January 19, 2015. REUTERS/Bobby Yip/File Photo

In some cases there had also been triple-digit price hikes by the affiliated companies with little obvious explanation.

"The ultimate aim is to ensure that customers know exactly what they are paying for," Maijoor said.

ESMA added it could provide agencies with "further supervisory guidance to ensure compliance with the relevant requirements".

The work so far has ESMA taken just over a year but it expects firms to start taking action to address its concerns this year and for it to continue next year.

For story on ESMA warning on trade repository fees click

(Reporting by Marc Jones; Editing by Catherine Evans)

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