Moody’s Germany fined EUR 2,145,000 for misreporting to ESMA

The European Securities and Markets Authority has fined Moody's Deutschland GmbH a total of EUR 2,145,000 for committing four breaches of the Credit Rating Agencies Regulation and issued a public notice, the regulator announced on 2 July.

“Moody's Germany breached the CRA Regulation by failing to provide complete, accurate and up-to-date data to ESMA. High quality, reliable reporting is critical for detecting risks and maintaining transparency in EU financial markets,” ESMA Chair Verena Ross said in the release. ESMA found that the breaches resulted from negligence on the part of Moody's Germany, and that the firm's regulatory reporting framework was deficient, including inadequate policies, procedures and internal controls, per the announcement.

The regulator noted a boundary on the failures: the data errors affected only submissions made to ESMA, not the credit ratings published on Moody's Germany's own website. Under the CRA Regulation, rating agencies must submit complete and accurate ratings data to ESMA for publication on the regulator's central platform — the reporting obligation at issue in the case.

Background

ESMA, based in Paris, is the European Union's financial markets regulator and one of the few EU bodies with direct supervisory power over firms: it has been the sole supervisor of credit rating agencies registered in the EU since 2011. The CRA Regulation itself is a product of the 2008 financial crisis, when the major agencies' ratings of structured products drew heavy criticism, and it gives ESMA the power to fine agencies and, in the extreme, withdraw their registration.

Moody's is one of the three agencies — with S&P Global Ratings and Fitch — that dominate the global credit rating market, and its German subsidiary is among its principal EU-registered entities. The central ratings data that agencies report to ESMA feeds public transparency tools that investors and regulators use to track ratings activity across the bloc, which is why ESMA treats reporting quality as a supervisory priority rather than a technicality.

What comes next

ESMA sanction decisions can be challenged before the EU courts, so the first question is whether Moody's Germany accepts the fine and public notice or contests them; the announcement records no position from the firm. The second is remediation: the deficiencies ESMA identified in policies, procedures and internal controls imply supervisory follow-up on the firm's reporting framework.