Discussion Paper on CRA3 Implementation

Discussion Paper on CRA3 Implementation

from 10 July 2013 to 10 October 2013


The European Securities and Markets Authority (ESMA) has published a Discussion Paper dealing with the implementation of the CRA3 Regulation, which entered into force on 20 June 2013.
The Regulation, which complements the existing regulatory framework for credit rating agencies (CRAs), requires ESMA to draft Regulatory Technical Standards (RTS) on:

disclosure requirements on structured finance instruments (SFIs);
the European Rating Platform (ERP); and
the periodic reporting on fees charged by CRAs.

ESMA is seeking views from all interested parties in order to assist in its preparation of the draft RTS to be published for consultation in early 2014. ESMA must submit the draft RTS to the European Commission by 21 June 2014.

Draft RTS on Information on Structured Finance Instruments
The draft RTS aims to facilitate the provision of adequate information on SFIs, and their underlying assets, to investors, in order to improve their ability to make informed assessments on the creditworthiness of SFIs, reduce reliance on external credit ratings, promote competition between CRAs and facilitate the assignment of unsolicited credit ratings.

The draft RTS will specify:

the information that issuers, originators and sponsors of structured finance instruments established in the Union must publish;
the frequency with which the information is to be updated; and
the presentation of the information by means of a standardised disclosure template.

The Discussion Paper focuses on identifying the categories of asset classes covered by the Regulation as well as the content, level of standardisation and frequency of the information to be provided by the issuer, sponsor and originator on a website to be set up by ESMA.
Draft RTS on European Rating Platform (ERP)

The Regulation requires ESMA to establish the ERP where CRAs will report up-to-date ratings and outlooks, together with data on the historical performance of their ratings. This information will be publicly available allowing investors to compare all credit ratings that exist regarding a specific rated issuer/instrument, and assist in their decision-making, thereby contributing to increased investor protection and improving the visibility of smaller CRAs.
The draft RTS will specify:

the content and format of ratings data periodic reporting to be requested from registered and certified CRAs for the purpose of on-going supervision; and
the content and the presentation of the information, including the structure, format, method and timing of reporting that credit rating agencies are to disclose to ESMA.

In order to enable ESMA to compile the necessary information on individual ratings and outlooks and allow for comparability across different CRAs, it is necessary to identify the needs of ratings users and the technical details of the credit rating agencies’ reporting requirements.
Draft RTS on fees charged by CRAs to their clients

The draft RTS aims to mitigate conflicts of interest and facilitate fair competition in the credit rating market, by ensuring that CRAs’ fees are cost-based, non-discriminatory and non-dependent on any result or outcome of the work performed or on the provision of ancillary services.

The Discussion Paper focuses on gathering information on CRAs’ fees and cost structure, as well as their pricing policy. The draft RTS will specify the content and the format of periodic reporting on fees charged by credit rating agencies for the purpose of on-going supervision by ESMA.

Next Steps

The Discussion Paper is open for comments until 10 October 2013. As part of the consultation process ESMA will hold a Public Hearing on CRA3 Regulation - new Regulatory Technical Standards from 10.00 to 13.00 on Thursday 25 July 2013.

ESMA is also considering publishing Q&As which will clarify some provisions and requirements of the CRA3 Regulation.



Document available for this Consultation
10/07/20132013/891Discussion Paper on CRA3 Implementation


Activity Institution Download
Asset Management EFAMA
Asset Management BVI
Banking AFME
Banking Nationwide Building Society
Banking Deutsche Bank
Banking German Banking Industry Committee (Deutsche Kreditwirtschaft)
Credit Rating Agencies Standard & Poor's Ratings Services
Credit Rating Agencies DBRS
Credit Rating Agencies A.M. Best Europe - Rating Services Limited
Credit Rating Agencies Moody's Investors Service
Credit Rating Agencies Japan Credit Rating Agency, Ltd.
Insurance and Pension Insurance Europe
Insurance and Pension German Insurance Association (GDV)
Others EACRA
Others Rating-Agentur Expert RA GmbH
Others True Sale International GmbH
Others Loan Market Association