US Agencies’ Market Shares Remain a European Debacle

The excessive regulation of rating agencies in the European Union (EU) has failed to achieve its goal.

The dominance of US rating agencies remains. Their ratings are practically the only decisive factor for the allocation of the economic resource “capital” in Europe. The three leading US agencies S&P Global Ratings Europe, Moody’s Investors Service and Fitch Ratings now account for 92.19% of turnover – and that even after “Brexit”, although the US agencies in the Anglo-Saxon region have natural advantages and these turnover shares are no longer included in new calculations.

The market share of these three agencies, S&P Global Ratings Europe, Moody’s Investors Service and Fitch Ratings, is, for example, 87.02% after 2012 and 91.07% in the last year 2019, now 92.19% in 2020. Politicians in Europe once thought they could use the opportunity of the global financial crisis to put the US agencies in their place.

It should also be noted in these figures that a number of credit rating agencies took steps to ensure the continuity of their rating activities before the UK’s exit from the EU was completed on December 31, 2020. Rating agencies, which – like the US market leaders – have a significant presence in the UK, have taken different approaches to restructuring their businesses. These changes impacted rating agencies’ applicable trunover from EU credit rating activities in 2020 and are reflected in the changes in rating agencies’ market shares in this year’s market share report.

Against this background, the changes in market share at S&P Global Ratings Europe and Moody’s Investors Service, but also at DBRS Ratings, can be seen in particular. With the new allocation, S&P Global Ratings Europe increases its market share in 2020 to 51.77% (from 40.40% in 2019), while Moody’s Investor Service keeps more sales in the United Kingdom (market share in the EU in 2020 only 30.12% after 33.12% in 2019). DBRS Ratings (1.11% 2020 after 2.99% 2019) as well as AM Best Europe-Rating Services (market share 2020 only 0.41% after 0.95% in 2019) lose market shares. All agencies that have given up market share have in common that they have their parent companies on the American continent and their main focus of activity in the most important European financial center, London, which was affected by Brexit.

Against the background of the effects mentioned, the increase in the market shares of the rating agencies remaining in the EU moves in the cosmetic area. CERVED Rating Agency (increase to 1.18% 2020 after 0.84% ​​2019), Scope Ratings (increase to 1.00% 2020 after 0.62% 2019) and CreditReform Rating (increase to 0.84% ​​after 0.53%). From the calculation mechanics of the market share calculation it follows that the other agencies can also show market share gains, although the dominance of the US agencies has not been broken.

The table published today by the European Securities and Markets Authority (ESMA) contains a list of all CRAs registered in the EU under the CRA regulation. For each rating agency, ESMA provides the applicable total market share. Finally, ESMA provides an indicator of whether a rating agency has an overall market share of less than 10%.