December 07, 2017

ESAs revised two implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk. The amendments reflect the recognition of five new credit rating agencies (CRAs) and the deregistration of one CRA. ESAs also published individual mapping reports illustrating how the methodology was applied to produce the five additional mappings under the Capital Requirements Regulation (CRR) mandate.

ESAs have specified an approach that establishes the correspondence—or mapping—between credit assessments and the credit-quality steps defined in the EU prudential regulation for banking (CRR) and the EU insurance regulation (Solvency II Directive). Since the adoption of these implementing technical standards, ESMA has withdrawn the registration of one CRA and five additional CRAs have been recognized. The implementing standards have, therefore, been amended to reflect the allocation of appropriate risk-weights to the newly established ECAIs and to remove the reference to the de-registered ECAI. Mappings for the other 25 ECAIs covered in the implementing technical standards remain unchanged. 

The revised draft standards have been developed according to Article 136 (1) and (3) of CRR (Regulation 575/2013) and Article 109 (a) of Solvency II Directive (Directive 2009/138/EC). The standards aim to ensure that only credit ratings issued by ECAIs can be used to calculate capital requirements of financial institutions and insurance undertakings. These ECAIs would include the CRAs registered under Regulation (EC) No 1060/2009 or central banks issuing credit ratings exempt from the application of the same regulation. The implementing standards are part of the EU Single Rulebook for banking and insurance and are intended to create a safe and sound regulatory framework consistently applicable across the EU.

 

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Keywords: Europe, Banking, Insurance, CRR, Solvency II, ECAIs, CRA, Credit Risk, Implementing Technical Standards, ESAs

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