The Monetary Authority of Singapore (MAS) and the European Securities and Markets Authority (ESMA) have signed a memorandum of understanding (MOU) on the supervision of credit rating agencies, the MAS said on Friday.
The new partnership will pave the way for the enhanced sharing of supervisory information between the two authorities for more effective supervision of cross-border credit rating agencies operating in Singapore and within the European Union, it said in a statement.
It also provides a formal basis for supervisory cooperation between the two parties, and facilitate EU registered credit rating agencies to endorse credit ratings issued in Singapore.
The ESMA said in a statement on Thursday that it allowed credit rating agencies to endorse credit ratings issued in the United States, Canada, Singapore and China's Hong Kong.
Steven Maijoor, chair of the ESMA, said that the move is "a major step towards the international convergence of credit rating agencies' oversight."
"At the same time, through enhancing the co-operation with third countries supervisors, ESMA contributes to the effective supervision of internationally active credit rating agencies, which is crucial for the well-functioning of financial markets and investor protection in the European Union," he was quoted as saying.
Many economies worldwide have been stepping up the regulation of the credit rating agencies in the aftermath of the global financial crisis, during which the role of the credit rating agencies was questioned by many.
Singapore launched a regulatory framework for credit rating agencies in January this year. Under the new framework, the provision of credit rating services will be regulated under the Securities and Futures Act. This means credit rating agencies will have to be licensed in order to provide credit rating services. The credit rating agencies will also have to comply with a new code of conduct for them.