ESMA fines five banks for illegal credit ratings
The European Securities and Markets Authority (ESMA) has fined Danske Bank, Nordea Bank, SEB, Svenska Handelsbanken and Swedbank €495,000 each and issued five public notices for negligently breaching the Credit Rating Agencies Regulation (CRAR). ESMA found that the five banks infringed the CRAR by issuing credit ratings without being authorised by ESMA to do so.
Between June 2011 and August 2016, the five banks issued credit research to their clients – and SEB continued to do so until May 2018. This credit research included the issuance of what the banks described as shadow ratings. These reports related to different entities and underlying financial instruments and these reports included opinions, which ESMA found met the definition of a credit rating provided for by the CRAR. However, no bank had acquired the necessary ESMA authorisation to issue ratings and such conduct infringes the CRAR which requires prior authorisation.
The individual fine amounts take into account the aggravating factor that the banks had committed the infringement for more than six months but also consider the mitigating factor that each bank has voluntarily taken measures to ensure that similar infringements could not be committed in the future.
None of the five banks was, or is, registered as a CRA nor had they applied for registration. Currently, there are 27 CRAs authorised by ESMA to issue credit ratings within the EU.
The five banks mentioned above may appeal against this decision to the Board of Appeal of the European Supervisory Authorities. Such an appeal does not suspend the fine, although it is possible for the Board of Appeal to suspend the application of the decision in accordance with the CRAR.