Credit rating agencies - modest progress First hedge funds. Now credit rating agencies. Slowly, the post-financial crisis regulatory revisions in Europe are slotting into place. Early in the new year, EU lawmakers are set to vote through a third package of regulations covering CRAs operating in Europe. This will finalise a new rule book for a segment of the financial services industry which was plainly culpable in the run-up to the 2008 crisis. That it has taken four years, three rounds of legislation and much haggling to get to this point is far from ideal. But while the end result may be criticised as a compromise, it does not look a bad one. CRAs now have to register, meet corporate governance standards and accept supervisory oversight. The latest round of rules, meanwhile, should make it easier to sue agencies if they issue grossly negligent or deliberately erroneous ratings. Conversely, some of the EU policy makers" more impractical ideas have been ditched. For example, forcing all issuers to rotate among a very small supply of non-niche CRAs always looked a non-starter: instead, mandatory rotation will be confined to re-securitisation ratings. Less satisfactory is the situation vis a vis sovereign ratings, which, in general, will have to be put out on three preordained dates each year. True, CRAs will have some scope to issue unsolicited ratings outside those dates but they will have to justify such exceptions to their regulators. Plainly, this new regime also fails to break with the existing "issuer pays" model; rather it tries to guard against the conflicts to which this gives rise. But perhaps the most important test is to come: namely, whether policy makers can succeed in reducing reliance on external ratings and in encouraging financial institutions to do their own internal work instead. In that respect, the impending Basel III rules may prove as important as those for CRAs.