European Market Gendarmerie

2020-06-04   |   by CusiGO

Esma, the European financial market gendarme, fined scope ratings 640000 euros. The credit rating agency has failed to comply with the approach it has reported since 2015 to systematically record safe bonds. The latter are debt instruments based on a basket of guarantees, including mortgages and public sector loans.

“In both cases, scope is a negligent crime and fails to comply with the special attention that credit rating agencies should give as professional financial services companies.”

By 2015, scope had adopted a confidence building measure, in which, in addition to analyzing the stability of the issuer’s credit, it also included two other stages of analysis. The first stage was to analyze the legal framework and resolution system. The second involves an analysis of the coverage of basic loans. Confidence building measures clearly state that a comprehensive analysis of all registered security obligations should be undertaken.

However, Esma found that scope did not systematically implement its confidence building measures because ratings released in September and November 2015 did not include the type of coverage group expected. As a result, of the 622 ratings, 559 were not analyzed under this open confidence building measure. This defect caused a loss of 550000 euros to scope ratings.

Esma also found that scope ratings did not notify regulators and consult publicly with stakeholders before making significant changes to its methodology in 2016. However, these changes are important as they change the conditions for the assessment of the safe, a violation for which the gendarmerie imposed a fine of 90000 euros.

Scope ratings was approved by the European market police in 2012. Founded in 2002 by the Florian Schoeller family, the company is one of the oldest industrial dynasties in Germany.

Small companies in Berlin are growing fast. As a founding professional of the German monetary and SME rating agency, it is currently studying all asset classes, including sovereign debt, and has adopted an international strategy. In January this year, scope ratings strengthened its team in France by recruiting Marc Lefevre as development manager in France, Belgium and Luxembourg, a former partner in the ey cabinet and manager of European listing activities. Scope also hired Barbara Cohen, formerly head of global credit research at BNP Paribas Asset Management, to validate the credit rating methodology.

Since November 2010, Esma has imposed sanctions on rating agencies. Currently, Fitch Ratings has been fined the most (5.13 million euros) because of a conflict of interest. Marc ladreit d e lachariere is a member of Renault’s and casino’s board of directors, while Fitch still owns 20% of the rating agency’s capital.