Credit Rating Agencies

The European Securities and Markets Authority (ESMA) has published a statement updating on its preparations for a no-deal Brexit scenario in view of recent developments on timing.

ESMA wants to highlight that, in relation to previously published measures and actions issued on the basis of a no-deal Brexit scenario on 29 March 2019, reference to the date of 29 March 2019 in these statements should now be read as 12 April 2019.

The European Securities and Markets Authority (ESMA), the supervisor of EU credit rating agencies (CRAs), has fined three CRAs belonging to the Fitch Group a total of €5,132,500. The fines relate to a series of infringements where the CRAs negligently failed to comply with requirements of the Credit Rating Agencies Regulation (CRAR) related to conflicts of interest that entered into force on 20 June 2013.  

ESMA has also issued supervisory measures against the three CRAs, in the form of public notices.

Fines for Fitch UK, Fitch France and Fitch Spain

Between June 2013 and April 2018, 20% of three Fitch subsidiaries – Fitch UK, Fitch France and Fitch Spain – were indirectly owned by an individual (the Fitch Shareholder), through an entity based in France. At the same time, the Fitch Shareholder was sitting on the boards of three entities rated by these Fitch subsidiaries.

ESMA found the three Fitch CRAs to have infringed conflict of interest requirements through rating activities conducted between 2013 and 2015, with regards to rated entities where the Fitch Shareholder was a board member, and due to a lack of adequate procedures and internal controls for conflicts of interest by Fitch until early 2017. Therefore, ESMA decided to fine:

  1. Fitch Ratings Limited (Fitch UK) €3,195,000 for negligently committing the following infringements:
    • Between 2013 and 2015, Fitch UK issued four new ratings on instruments issued by a listed entity while the Fitch Shareholder sat on the Board of this entity;
    • Fitch UK failed to immediately assess the need to re-rate or withdraw ratings previously issued with regards to another entity, where the Fitch Shareholder sat on the Board of this entity; and
    • Until March 2017, Fitch UK did not set, at a centralised level, adequate procedures and internal control mechanisms with respect to conflicts of interest, to be applied by the Fitch Group located in the European Union (EU).
  2. Fitch France S.A.S. (Fitch France) €812,500 for negligently committing the following infringement:
    • Fitch France failed to disclose conflicts of interest regarding existing ratings of an entity, while the Fitch Shareholder sat on the Board of this entity.
  3. Fitch Ratings España S.A.U. (Fitch Spain) €1,125,000 for committing the following infringement:
    • Between 2013 and 2015, Fitch Spain negligently issued eight new ratings on instruments issued by a listed entity while the Fitch Shareholder sat on the Board of this entity; and
    • Fitch Spain also failed to disclose that the existing ratings of the same listed entity were potentially impacted by the board membership of the Fitch Shareholder, however, ESMA imposed no fine as this infringement was committed without negligence.

ESMA has considered measures voluntarily taken by the three Fitch subsidiaries to ensure similar infringements could not be committed in the future and applied, when applicable, both mitigating and aggravating factors provided by the CRAR, which are reflected in the amounts of the fines.


To ensure independent and good quality ratings, the CRAR requires CRAs to carefully identify and eliminate or manage and disclose conflicts of interest to avoid interference with the rating process. New provisions amending the CRAR, that entered into force on 20 June 2013, identify, as a specific situation of conflicts of interest, the case where a shareholder holding more than 10% of the capital/voting rights of the CRA simultaneously sits on the board of the rated entity.  

CRAs to whom this applies are prohibited from issuing new credit ratings for such entities. In case of existing ratings i.e. issued before 20 June 2013, CRAs must immediately disclose where the rating may potentially be affected by the described circumstances. Moreover, CRAs immediately need to assess whether there are grounds for re-rating or withdrawing the existing credit rating.

In addition, the CRAR requires CRAs to establish adequate policies and procedures and the need to have in place internal control mechanisms to ensure compliance with the obligations under the Regulation.

Fitch’s right to appeal

Any of the three Fitch subsidiaries may appeal against this decision to the Board of Appeal of the European Supervisory Authorities. However, such an appeal does not have suspensive effect, although it is possible for the Board of Appeal to suspend the application of the decision in accordance with Article 60(3) ESMA Regulation.

The European Securities and Markets Authority (ESMA), the EU’s direct supervisor of credit rating agencies (CRAs), has registered today Beyond Ratings SAS as a CRA under the CRA Regulation.

Beyond Ratings SAS is based in Paris, France, and intends to issue sovereign and public finance ratings. The registration takes effect from today, 18 March 2019. 

The CRA Regulation seeks to ensure that credit ratings issued in the EU meet minimum standards of quality, transparency and independence by providing that only companies registered by ESMA as CRAs may lawfully issue credit ratings which can be used for regulatory purposes by credit institutions, investment firms, insurance and reinsurance undertakings, institutions for occupational retirement provision, management companies, investment companies, alternative investment fund managers and central counterparties. 

To be registered as a CRA, a company must be able to demonstrate to ESMA that it complies with the requirements of the CRA Regulation, which covers inter alia:

·       the governance of CRAs and the management of conflicts of interest;

·       the development and application of methodologies for assessing credit risk; and

·       the disclosure of information to ESMA and to market participants. 


Once registered, CRAs are subject to on-going monitoring and supervision by ESMA to ensure that they continue to meet the conditions for registration. ESMA will impose sanctions and/or penalties where it finds that a CRA has failed to meet its obligations under the CRA Regulation. 

The total number of CRAs registered in the EU is 28 CRAs. Amongst the 28 registered CRAs, four operate under a group structure, totalling 19 legal entities in the EU, which means that the total number of CRA entities registered in the EU is 43​.


The European Securities and Markets Authority (ESMA) has issued today a statement which sets out the implications for credit rating agencies (CRAs) based in the United Kingdom (UK), including the endorsement of UK credit ratings, should the UK withdraw from the European Union (EU) without a withdrawal agreement (no-deal Brexit).

The statement follows ESMA's earlier statement of 9 November 2018.