CRA Regulation

ESMA Publishes Consolidated Guidelines on the Application of the Endorsement Regime Under CRA Regulation

 

On March 20, the European Securities and Markets Authority (ESMA) published the official translations of its consolidated guidelines on the application of the endorsement regime under Article 4(3) of the Credit Rating Agencies Regulation (Regulation 1060/2009) (CRA Regulation) (ESMA33-9-282). READ MORE

ESMA Fines Fitch CRAs for Breaching Conflict of Interest Requirements

 

On March 28, ESMA fined three credit rating agencies, all belonging to the Fitch Group, a total of €5,132,500, in relation to breaching the conflict of interest requirements under the CRA Regulation (1060/2009) (CRAR). They were fined because, between June 2013 and April 2018, 20% of three Fitch subsidiaries were indirectly owned by an individual through a French entity. However, that same individual was also sitting on the boards of three entities rated by the Fitch subsidiaries.

Each of the three subsidiaries voluntarily undertook measures to ensure similar infringements would not be committed again, and this was considered by ESMA, along with other mitigating and aggravating factors, when the fines were determined. The subsidiaries can appeal the decision but this will not have a suspensive effect.

The public notice issued in relation to the fines can be found here.

ESMA Confirms That Canada and South Africa Will Continue to Meet All CRA Regulation (Regulation 1060/2009) Requirements From June 2018

 

The European Securities and Markets Authority (“ESMA“) has on April 4, 2018 published a press release which confirms that Canada and South Africa will continue to meet all requirements for endorsement under Art 4(3) of the Credit Rating Agencies Regulation (“CRA Regulation“).

In the release, ESMA confirms that the legal and supervisory frameworks of Canada and South Africa will continue to meet the requirements for endorsement under the CRA Regulation from June 1, 2018. This was confirmed following an assessment based on the methodological framework applicable under the CRA Regulation. As a result of this confirmation, any CRAs registered in the EU to endorse credit ratings from Canada and South Africa will not be disrupted from June 1, 2018.

To view the press release, please click here.

European Commission Report on Credit Rating Agencies Regulation

 

On October 19, 2016, the European Commission published a report (COM(2016) 664 final) responding to reporting obligations set out in Regulation 1060/2009 (CRA Regulation).

The report:

  • Analyzes references to external credit ratings in EU legislation and in private contracts among parties in financial markets.
  • Assesses potential alternatives to external credit ratings that are currently used by market participants in the EU. The Commission is of the view that there are currently no feasible alternatives that could entirely replace external credit ratings.
  • Evaluates the impact of the CRA Regulation on governance and internal procedures of CRAs, in particular the prevention of conflict of interests and the use of alternative remuneration models.
  • Analyzes the provisions relating to structured finance instruments (SFIs) and their potential extension to other asset classes. The Commission does not think it is appropriate to extend CRA Regulation provisions to other financial products.
  • Assesses the impact and effectiveness of the CRA Regulation’s measures concerning competition in the credit rating industry. Given some provisions are still in the process of implementation, the Commission will continue monitoring the development of the market before considering the adoption of further measures. More generally, the Commission will seek to avoid and further reduce regulatory barriers to market entry.
  • Considers the feasibility of establishing a European CRA for the assessment of sovereign debt and a European credit rating foundation for all other credit ratings. The Commission considers there to be no need at present for a European CRA specialized in sovereign debt or for other credit ratings.