In a statement, the European Union's executive arm said the new measures will introduce a common regime for the issuance of credit ratings to improve investor protection and help rebuild confidence in the markets.
The commission said CRAs "contributed significantly" to the current downturn by giving AAA ratings to complex financial instruments without properly assessing their associated risks. They also failed to adjust their ratings quickly enough once the market began to deteriorate, it added.
The new regulations prohibit CRAs from rating financial instruments if they do not have "sufficiently quality information" to base it on.
In addition, CRAs will be required to disclose the models, methodologies and key assumptions they use for ratings, conduct internal reviews of their guidance and publish an annual transparency report.
Moreover, the agencies will be banned from offering advisory services.
Organizations including the Committee of European Securities Regulators and the European Securities Markets Expert Group contributed to the public consultation on the new regulations.