ANNUAL REPORT 2008 - Polymer Bank Notes of the World

Commission identified key areas of divergencebetween the IFRS and US-GAAP and urgedthe accounting standard-setters to address theseas a matter of priority. Following the positiveopinions of the ECOFIN Council, the EuropeanParliament and the European SecuritiesCommittee, the European Commission decidedon 12 December 2008 that the generallyaccepted accounting principles of the UnitedStates, Japan, China, Canada, South Korea andIndia would be considered equivalent to theIFRS as of January 2009. The Commission alsoannounced that it would keep the situation underreview and would report on its findings by 2011at the latest for the last four countries. The ECBis closely monitoring these developments.2.3 SECURITIESSince the outbreak of the financial marketturmoil, credit rating agencies have been widelycriticised for their initial ratings of structuredfinance securities, owing to the perception thattheir ratings did not fully reflect the risksinherent in those securities. The FSF report onenhancing market and institutional resilience of7 April 2008 9 highlighted some weaknesses inrating models and methodologies and made anumber of recommendations for furthermeasures to enhance the quality of the ratingprocess. In order to address such issues, on31 July 2008 the European Commissionpublished for consultation a draft regulation oncredit rating agencies. This draft regulationaddresses the conditions for the authorisation,operation and supervision of credit ratingagencies and aims to ensure that such agenciesmeet high standards of independence, integrityand quality in the performance of their tasks.The Eurosystem responded to the publicconsultation on 25 September 2008, 10 broadlywelcoming the draft proposal. It emphasisedthat an EU regulation on credit rating agenciesshould aim to increase the level of transparencyrelated to the issuance of ratings and the ongoingsurveillance of those ratings, ensure that theregulatory framework does not interfere withthe content of ratings, and safeguard the integrityand independence of agencies by dealing withconflicts of interest. The Eurosystem suggestedan EU regulatory and supervisory structureaccording to which credit rating agencies wouldstill be formally authorised and supervised bythe national supervisors, but this authorisationand supervision would follow a joint assessmentprocess and be accompanied by a jointsupervisory process. CESR could play a role inthe coordination of the competent nationalauthorities as regards both the authorisation andthe implementation of enforcement action.Finally, the Eurosystem stressed that anycoordination arrangements for the regulationand supervision of credit rating agencies shouldallow for an appropriate level of involvementby the Eurosystem, given that it has alreadyestablished a Eurosystem credit assessmentframework which monitors the performanceand activities of agencies in the context of theimplementation of monetary policy operations.Following a public consultation, the Commissionpublished a proposal for a regulation on creditrating agencies in November 2008.9 http://www.fsforum.org/publications/r_0804.pdf10 http://www.ecb.europa.eu/pub/pdf/other/regulationcreditratingagencies2008en.pdfECBAnnual Report2008157