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ESMA fines Moody's in Germany and UK €1.24 million for lack of transparency

The European Securities and Markets Authority (ESMA) has fined Moody’s Germany €750,000 and Moody’s UK €490,000 for two breaches of the Credit Rating Agencies Regulation (CRAR).05 Jun 2017

ESMA said the two bodies infringed the CRAR in their public announcement of 19 ratings and their public disclosure of the methodologies they used to determine those ratings.

Moody’s Germany issued sixteen of these ratings, Moody’s UK the other three.

The public announcement of the ratings between June 2011 and December 2013 included no material sources of public information other than press releases, ESMA said.

"These failed to indicate the principal methodology used for the ratings decisions and failed to refer to any comprehensive descriptions of the methodology used," it said.

The methodology used was not disclosed publicly either before or after the public rating announcements, and this infringement continued for more than six months, ESMA said.

The quality and disclosure of credit rating methodologies is an important objective of the CRAR, and allows investors and market participants to check that ratings are reliable, the authority said.

Moody’s Germany and Moody’s UK may appeal against this decision to the Board of Appeal of the European Supervisory Authorities, ESMA said.

The European Commission introduced new, stricter rules for the regulation of credit rating agencies by ESMA in 2014.

In 2015 ESMA fined DBRS Ratings €30,000 for failing to comply with the CRAR on record keeping and published a public notice censuring the agency for failings in corporate governance, compliance and record keeping.

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