The Dual Role of ESMA’s Chair and the Independence of Credit Rating Agencies

When Verena Ross, Chair of the European Securities and Markets Authority (ESMA), warns about mounting risks in financial markets, her words carry institutional weight. In a recent statement she emphasized that “the risks are skewed to the downside” and cautioned investors to brace for “heightened uncertainty across asset classes.”

At first glance, such remarks might seem like standard supervisory prudence. Yet there is a particular complexity here: ESMA, under Ross’s leadership, is not only a macro-prudential authority but also the direct supervisor of credit rating agencies in the European Union. As such, her public assessments of risks occupy a sensitive position.

The problem lies in the potential tension between ESMA’s supervisory responsibilities and the independence of rating agencies. These agencies are mandated to provide their own risk assessments and credit opinions. If the head of their regulator publicly advances strong views about systemic risks, market participants might question whether rating agencies can maintain full independence in their judgments, or whether their analyses could be perceived as aligning—voluntarily or implicitly—with the supervisory narrative.

This situation highlights a structural dilemma. On the one hand, the regulator is expected to monitor financial stability and warn against vulnerabilities. On the other, credit rating agencies are supposed to take on the task of analyzing credit risk independently and bearing responsibility for their ratings. When ESMA’s leadership voices its own risk outlook, it blurs the line between regulatory oversight and risk assessment.

The challenge is not new, but Ross’s position makes it especially visible. Her dual role means that ESMA must ensure it does not inadvertently substitute or pre-empt the very function it supervises. Rating agencies need space to form judgments without the perception of regulatory pressure. As Ross herself noted in her remarks, “financial stability depends on credible assessments of risk.” That credibility can only be preserved if the agencies tasked with risk evaluation remain free to operate without undue influence—even from their own supervisor.