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ESMA publishes 2017 supervision plan for CRAs, trade repositories and 3rd country CCPs

03 February 2017

The European Securities and Markets Authority (ESMA) has today published its Annual Report and Supervision Work Programmes (Report) setting out its main areas of supervisory focus for credit rating agencies (CRAs), trade repositories (TRs), and third country central counterparties (CCPs) in the European Union (EU). The Report also details the actions ESMA has taken in 2016 in carrying out its supervisory role.

Steven Maijoor, ESMA Chair, said

“Our supervisory responsibilities are a key part of the EU’s objective in promoting financial stability and protecting investors.

“ESMA’s supervisory work in 2016 resulted in a number of tangible results. Key among these were the launch of the European Ratings Platform providing investors with access to free information on all EU credit ratings under the issuer pays model; a fine of €1.38mn on a CRA for failing to comply with important requirements of the CRA Regulation; our first fine of a trade repository and our recognition of 11 third country CCPs.

“Looking forward to 2017, strategy and governance will be a key theme for both CRAs and trade repositories, particularly in light of the UK exiting the EU. In addition, we will focus on the quality of ratings, internal controls and risk assessment for CRAs, and data quality, technology trends and internal control at trade repositories. Finally, our work on CCPs will focus on recognition requests and a risk analysis framework for existing recognised entities.”

A focus on data quality

For TRs and CRAs, the key supervisory themes identified for 2017 are a result of ESMA’s risk-based supervisory approach. ESMA will continue to focus on the quality of the information produced by TRs - the quality of trade repository data – and its availability, given its critical importance to regulators and overall financial stability.

ESMA will also continue to focus on the quality of credit ratings. In particular, CRAs’ implementation of ESMA’s 2016 Guidelines, which clarify how CRAs should validate and review their methodologies, will be an important part of how ESMA ensures adequate validation practices across CRAs.

Common themes in supervising both CRAs and TRs will include business strategy in light of the UK exiting the EU, governance issues, the implementation of ESMA’s supervisory strategy on fees, internal controls and IT issues and trends.

Third country CCPs

ESMA’s monitoring of third country CCPs reinforces its capacity to identify and assess the related risks to EU investors and to financial stability in the EU. Its priorities for 2017 relate to pending requests by third country CCPs for recognition, as more countries are declared equivalent, and the finalisation of a risk framework to identify priorities for recognised third country CCPs.