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Non-EU CRAs

Non-EU Credit Rating Agencies

If a non-EU CRA wants its ratings to be used for regulatory purposes in the EU (i.e. by EU financial institutions) the CRA Regulation provides for two alternatives, certification or endorsement.

Equivalence / Certification

The equivalence regime is made available for CRAs from non-EU countries with no presence or affiliation in the EU, provided they are not systemically important for the financial stability or integrity of the financial markets of one or more Member States, and in order to allow the use in the Union of credit ratings related to entities established, or financial instruments issued in non-EU countries.

This certification process will take into consideration the size of the CRA, in view of the nature, complexity and range of issuance of its credit ratings on which the CRA might be exempted from a physical presence in the EU. This procedure requires a previous decision by the European Commission on the equivalence of the non-EU country regulatory and supervisory regime on CRAs and the establishment of a cooperation arrangement between ESMA and the relevant non-EU country Authority.

Endorsement

The endorsement regime is made available for CRAs that are affiliated or work closely with EU-registered CRAs. It requires that the CRA established in a non-EU country complies with legal requirements which are “as stringent as” the requirements provided for in the EU Regulation and are subject to effective supervision.

  Equivalence/Certification Endorsement

Type of credit ratings

Credit ratings issued on non-EU issuers or instruments and from third countries

Credit ratings on EU and non-EU issuers or instruments.

Credit ratings issued

By a CRA established & supervised in a third country, which may be exempted from a physical presence in the EU.

By a CRA based outside the EU but belonging to the same group of a CRA registered with ESMA.

Can be used for regulatory purposes in the EU if (non-exhaustive) …

  • The third country CRA is registered and supervised in the third country
  • Cooperation agreement with the third country supervisor (MoU)
  • Ratings are not of “systemic importance” for one or more member states.

 

  • The third country CRA is registered and supervised in the third country
  • Cooperation agreement with the third country supervisor (MoU)
  • There is an objective reason for credit ratings to be performed outside the EU.

 

… for credit ratings issued in

  • Argentina;
  • Australia;
  • Brazil;
  • Canada;
  • Hong Kong;
  • Japan;
  • Mexico;
  • Singapore;
  • US.

(Countries for which the European Commission has adopted a decision that the third country regime is equivalent to the EU Regulation)

  • Argentina;
  • Australia;
  • Brazil;
  • Canada;
  • Hong Kong;
  • Japan;
  • Mexico;
  • Singapore;
  • South Africa;
  • US.

(Countries for which ESMA has assessed that the third country regime is “as stringent as” the EU regime)

 

Memoranda of Understanding (MoU)

In the context of international cooperation for the supervision of CRAs, ESMA has signed the following MoUs:

For ESMA’s Technical Advice to the European Commission on third country regulatory equivalence please visit the CRA Policy page.

IOSCO

As part of its International Cooperation ESMA contributes to the work of IOSCO Committee on Credit Rating Agencies (Committee 6) as well as IOSCO’s Supervisory Colleges for CRAs

The Role of a CRA College

  • Promotes information sharing among supervisors of an internationally active CRA.
  • Conducts collective risk assessment with respect to an internationally active CRA.
  • Coordinates supervisory activities (if agreed upon by members).
  • Provides feedback on application of IOSCO Cross-Border Principles and IOSCO Code of Conduct for CRAs and makes recommendations to IOSCO C6 for updates to clarification of the IOSCO Cross-Border Principles and Code.
  • Shares collective risk assessment with IOSCO C6.
  • Attended by examiners and/or inspectors of CRAs.

For information on ESMA’s contribution to IOSCO Committee 6 please visit the CRA Policy page.