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EU watchdog fines Moody's for regulation breaches

The European Securities and Markets Authority has hit Moody's with a €1.2 million fine for failing to publicly disclose the methodologies it used to determine certain ratings decisions on EU institutions.

The regulator fined Moody's Deutschland GmbH and Moody's Investors Service Ltd. €750,000 and €490,000, respectively, for two infringements of the Credit Rating Agencies Regulation in relation to 19 ratings issued between June 2011 and December 2013.

These ratings relate to nine supranational entities, including the European Investment Bank, the European Investment Fund, the European Stability Mechanism, the European Financial Stability Facility and the EU.

ESMA said Moody's failed to include material sources of public information other than press releases in its public announcements of these 19 ratings, which did not indicate the principal methodology used for the ratings decisions and fell short of making references to any comprehensive descriptions of the methodology used.

Moreover, the methodology used by Moody's in the 19 ratings was not the subject of any separate public disclosure either before or after the public rating announcements, the regulator added.

"Given the role of [credit rating agencies] and ratings in financial markets, and their impact on investor trust and confidence, it is essential that high standards of transparency are maintained and enforced," the regulator said.