The European Securities and Markets Authority (ESMA) has imposed a fine of € 3.7 million on credit rating agency Moody’s for conflicts of interest. According to the European Union’s watchdog, Moody’s regulations on this matter have been violated.
Credit rating agencies should not provide new credit assessments of companies in which their own shareholders hold a stake of more than 10% or are members of senior management. Moody’s did it, according to ESMA. In addition, Moody’s did not fully disclose conflicts of interest and there was a lack of internal control of compliance with the rules. ESMA speaks of Moody’s negligence in this area.
The infringements occurred between 2013 and 2017 by Moody’s components in the UK, France, Spain, Italy and Germany. According to Moody’s, there was no intent and the quality of the credit assessment was not affected. Steps have been taken to prevent similar violations in the future, according to Moody’s.
Moody’s, together with S&P Global and Fitch, is one of the three leading rating agencies. Fitch was fined 5.1 million euros by ESMA a few years ago for a similar case.