LONDON, Feb 28 (IFR) - While the 'big three' ratings
agencies are scrambling to work out whether they will be able to
conduct business from London after Brexit, one of their rivals
decided months ago that Dublin was the place to launch a push
into the European market.
Moody's, Standard & Poor's and Fitch all have their European
headquarters in London, where the UK's membership of the
European Union means they can be regulated by the Paris-based
European Securities and Markets Authority.
ESMA authorisation requires firms to have a "meaningful
presence" in the EU - essentially they need to prove their
senior management and key operations are genuinely run from
inside the bloc - presenting a problem for agencies once the UK
triggers its two-year exit from the union next month.
Kroll Bond Ratings Agency, one of the big three's smaller
rivals, has already decided that London is no longer the best
place to run a European ratings business.
"We made the decision some time ago that setting up our
European presence in London post-referendum might send the wrong
message to the Continent," said Mauricio Noe, who is charged
with running Kroll's fledgling European operation.
"In time, we will have to be in both locations – you can't
ignore the UK economy and the assets under management there –
but we are now staffing up across all functions in Dublin, not
The Bank of England and the Financial Conduct Authority, the
UK's banking and markets regulators, are the two obvious
candidates to take over ESMA's supervision post-Brexit.
But market participants are not certain they are ready or
willing to take the job on and, if so, whether there is enough
time to draft the necessary legislation.
That raises the spectre of Moody's, S&P and Fitch having to
move key personnel and operations away from the UK capital in
order to keep their stranglehold on the US$2.5trn sold annually
in Europe's bond market.
Ireland 'attracting FDI for 60 years'
However, Noe told IFR Kroll's decision was based on pull as
well as push factors, saying the company was impressed by IDA,
Ireland's foreign direct investment division.
"They have been attracting foreign investment for 60 years,"
"The other places people are talking about benefiting from
Brexit, the likes of Madrid, Paris, Frankfurt, they are only
just starting now."
Noe said that housing, schools, availability of staff and
employment law were all important factors to consider, and that
Dublin was "top of the list" for these.
"Tax is pretty low on our list of priorities," he added.
New York-based Kroll has been certified by ESMA since 2013,
though most of the European securities it currently rates are
for European clients looking to sell to US investors.
The next step is to sell more deals into the European
investor base, said Noe.
"We are expanding naturally from our strengths in the US in
mortgage-backed, infrastructure, public finance and aviation
products," he said.
"Name recognition is critical."
(Reporting by Tom Porter; Editing by Philip Wright)