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Singapore credit ratings can still be used in the EU, says MAS

SINGAPORE credit agencies’ ratings can still be recognised in Europe, even though the EU no longer considers them equivalent, the republic’s central bank affirmed on Monday evening.

That is because the ratings issued by agencies here can still be endorsed by their counterparts in the European Union, the Monetary Authority of Singapore (MAS) said in a statement.

Singapore-based credit agencies had previously been held by the European Securities and Markets Authority (ESMA) to meet the conditions for both equivalence and endorsement.

But the European Commission (EC) - which makes equivalence decisions based on how other regulatory regimes reach the same outcomes as their corresponding European rules - dropped equivalence status for credit agencies from Singapore and four other countries on Monday.

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Non-EU credit agencies that want their ratings to be used within the EU can opt for two methods under Europe’s Credit Rating Agencies Regulation: equivalence certification, for agencies that have no presence or affiliation in the EU; and endorsement, for agencies that are affiliated or work closely with credit agencies registered in the EU.

While the EC has now extended the equivalence decisions for credit rating agencies in Hong Kong, Japan, Mexico and the United States, it said in a statement that it has also repealed the equivalence status for Singapore, Canada, Brazil, Argentina and Australia.

“These jurisdictions could no longer meet the standards set by the EU credit rating agencies,” the European regulator said, citing amendments made in 2013 to tackle weaknesses related to sovereign debt credit ratings.

“The countries decided, after discussions with the Commission, not to implement the necessary legislative adjustments given the limited scale of activity to be covered,” it added, in an internal document that was sent to other EU bodies.

Still, Singapore remains among the countries that have been deemed by the ESMA to meet the legal and supervisory framework for endorsement, the MAS has noted.

Under ESMA guidelines that kicked in on Jan 1, 2019, EU credit agencies can endorse the ratings issued by agencies outside Europe if the non-European credit agencies meet the relevant endorsement provisions or have equally stringent internal requirements.

“As confirmed by the EC, (credit agencies) in Singapore will continue to be able to access the EU market through the endorsement regime which they currently operate under,” the MAS said.

ESMA chairman Steven Maijoor and Teo Swee Lian, then deputy managing director of the MAS, had signed a memorandum of understanding on supervising credit agencies in March 2012.