The Council position on two proposals amending the EU's rules on credit rating agencies ("CRA 3") has been agreed by the Permanent Representatives Committee on 21 of May. The draft directive specifically amends current directives on undertakings of collective investment in transferable securities (UCITS) and on alternative investment funds managers (AIFM) in order to reduce these funds' reliance on external credit ratings when assessing the creditworthiness of their assets.

The Danish Presidency of the Council will start the negotiations with MEPs following the mandate given by the Permanent Representatives Committee after agreed the Council's position on two proposals amending the EU's rules on credit rating agencies ("CRA 3"). The proposals for a directive and a regulation set out to amend existing legislation on credit rating agencies (CRAs) in order to reduce investors' over-reliance on external credit ratings, mitigate the risk of conflicts of interest in credit rating activities and increase transparency and competition in the sector. Already in June 2011, the EP called for more control over credit rating agencies and proposed a European Credit Rating Foundation.

Among other things, the draft regulation would introduce a mandatory rotation rule forcing issuers of financial instruments who pay CRAs for their ratings ("issuer pays model") to switch to a different agency every four years. The proposal agreed by the Representatives stating Council's general approach, would limit mandatory rotation to ratings of structured finance products with underlying re-securitised assets. Moreover a review clause would provide the possibility for mandatory rotation to be extended to other instruments in the future.

In addition, the draft regulation would also require issuers to engage at least two different CRA for the rating of structured finance instruments, due to the complexity of structured finance instruments and their role in contributing to the financial crisis. Besides, under the rules agreed in the general approach, investors or issuers would be able to claim damages from a CRA if they suffered a loss due to an infringement committed by the agency intentionally or with gross negligence. Furthermore, sovereign ratings would have to be reviewed at least every six months rather than every 12 months as currently applicable under general rules.