Credit Rating Agencies

Consultation on Revised Guidelines on Periodic Reporting by CRAs

ESMA invites comments on all matters in this paper and in particular on the specific questions summarised in Annex I. Comments are most helpful if they: 

  • respond to the question stated; 
  • indicate the specific question to which the comment relates; 
  • contain a clear rationale; and 
  • describe any alternatives ESMA should consider.

ESMA will consider all comments received by 26 September 2018.  

The European Securities and Markets Authority (ESMA) has published today supplementary guidance on the application of the endorsement regime for non-EU credit ratings under the Credit Rating Agencies Regulation (CRAR). In order to ensure that third-country credit ratings, which are endorsed for use by EU investors, meet requirements which are at least as stringent as those set out in CRAR, ESMA adds a new section to its Guidelines on Endorsement first published in November 2017.

In 2017, ESMA clarified that there are two ways for an EU CRA to ensure that an endorsed credit rating issued by a third-country CRA meets the as stringent as test. The EU CRA has verified, and is able to demonstrate that, either:

  • the conduct of the third-country CRA fulfills the relevant endorsement provisions of the CRAR; or
  • the third-country CRA has established and adheres to alternative internal requirements, which are at least as stringent as the relevant endorsement provisions of the CRAR.

The new section aims to assist EU CRAs in assessing whether a third-country CRA’s internal requirements meet the as stringent as test. This is done by setting out the general principles underpinning the as stringent as test and providing a non-exhaustive list of alternative internal requirements which ESMA considers to pass the test. The identified alternative requirements relate to:

  • fees charged by CRAs;
  • analyst rotation;
  • pre-publication of issuer notification;
  • certain rating disclosures (transparency report, initial reviews, and preliminary ratings); and
  • the treatment of inside information.

These supplementary guidelines will ensure an effective application of the 2013 amendments to CRAR (CRA3)  for endorsed credit ratings and a high level of protection of European investors who use endorsed credit ratings for regulatory purposes.

The Guidelines will enter into force on 1 January 2019.

The European Securities and Markets Authority (ESMA) has issued today a first set of technical standards under the Securitisation Regulation (SR) containing both draft regulatory and implementing standards (RTS/ITS).

Regulation (SR) containing both draft regulatory and implementing standards (RTS/ITS). These TS contain detailed arrangements to implement the new European regulatory framework for securitisations, which is intended to promote simple, transparent and standardised (STS) securitisations.

Notification templates for STS securitisations

ESMA’s draft TS specify the information and format that the originators and sponsors of securitisation products are required to notify to ESMA should a securitisation transaction meet the STS requirements. The STS notification is a necessary step in order to apply for STS preferential capital treatment.

The STS notification standardised templates distinguishes between non-ABCP (Asset Backed Commercial Paper) securitisation, ABCP transaction and ABCP programme. The STS notification needs to include a confirmation, concise explanation or detailed explanation as to why the securitisation transaction satisfies each of the STS criteria. This obligation is proportionate, as some criteria require greater explanation than others. The notification process also includes a cross-referencing system to investment prospectuses, if any, to avoid duplication of disclosure requirements.

Authorisation of third party assessing STS compliance

The draft RTS specifies the information to be provided to the competent authorities in the application for the authorisation of a third party assessing the compliance of securitisations with the STS criteria.

Next Steps

ESMA has submitted today for endorsement its final draft RTS/ITS to the European Commission. These RTS/ITS will contribute to delivering a regulatory rule-book for European securitisation markets.

 

The European Securities and Markets Authority (ESMA) has published the responses received to its Consultation on Draft Guidelines on “as stringent as” notion in the CRA Regulation.

To view the responses, please click the button below.

The European Securities and Markets Authority (ESMA) has published its latest set of semi-annual statistical data on the performance of credit ratings, including transition matrices and default rates. This latest dataset covers the period from 1 January 2016 to 31 December 2017 and is available in the Central Rating Repository (CEREP).

CEREP provides information on credit ratings issued by Credit Rating Agencies (CRAs) which are either registered or certified in the European Union. It allows investors to assess, on a single platform, the performance and reliability of credit ratings for different CRAs, asset classes, geographical regions and time horizons over a given time period.

CEREP is updated on a semi-annual basis with statistics covering the preceding 6-month period: the reporting periods are January to June and July to December.

 

The European Securities and Markets Authority (ESMA) has today issued an update stating that the legal and supervisory frameworks of Canada and South Africa will continue to meet the requirements for endorsement under CRA Regulation (CRAR) from June 2018.

In November 2017, ESMA published an updated methodological framework for the endorsement of credit ratings in its Guidelines on Endorsement. This new methodological framework incorporated the requirements introduced by CRA 3 that are due to enter into force for the purposes of endorsement from 1 June 2018.

Following an assessment based on this new methodological framework, ESMA finds that the legal and supervisory frameworks of Canada and South Africa will continue to meet the requirements for endorsement under CRAR from 1 June 2018.

As a result, there will be no disruption to EU registered credit rating agencies’ ability to endorse credit ratings from these jurisdictions following the entry into force of the new requirements.

Further details

For the full list of all countries that are eligible for the purposes of endorsement under CRAR please visit the following section of ESMA’s website.

The European Securities and Markets Authority (ESMA) has today published a Consultation Paper (CP) with proposed supplementary guidance on the application of the endorsement regime. This consultation follows on from the updated Guidelines on endorsement (November 2017), and comes in response to requests from the industry.  

The aim of the proposed supplementary guidance is twofold:

  1. To provide clarity regarding the general principle ESMA relies on when assessing whether an alternative requirement can be considered as stringent as a requirement set out in the CRA Regulation (CRAR); and
  2. ESMA’s concrete assessment of a number of alternative internal requirements which are currently in place in a third-country Credit Rating Agency (CRA).

Requirements which are at least as stringent as those set out in CRAR

In the updated Guidelines on endorsement which ESMA published in November 2017, ESMA clarified that compliance with the third-country legal framework will no longer be considered proof that a third-country CRA “fulfils requirements which are at least as stringent as” those set out in the CRAR. Instead, an endorsing CRA has two options to demonstrate to ESMA that the “as stringent as” condition is met:

  • Stating that the third-country CRA complies with the relevant provisions of CRAR; or,
  • Stating that the third-country CRA has established and fulfils alternative internal requirements, which are at least as stringent as the relevant endorsement provisions of CRAR.

Next steps

The consultation will be open for a two-month period, with a deadline for submissions on 25 May 2018.  The CP proposes to add the supplementary guidance as an additional subsection of ESMA’s updated Guidelines on Endorsement which will apply to credit ratings issued after 1 January 2019 or reviewed after that date.