ESMA, the direct supervisor of credit rating agencies (CRAs) in EU, has registered DBRS Ratings GmbH (DBRS RG) as a CRA under the CRA Regulation, with effect from December 14, 2018. DBRS RG is based in Germany and intends to issue sovereign and public finance ratings; structured finance ratings; and corporate ratings of financials and non-financials. DBRS RG belongs to a group of CRAs and intends to endorse ratings issued by third-country CRAs of the group, based in the United States and Canada. Those CRAs are registered by and are subject to the supervision of the respective local competent authorities.
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. These credit ratings 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 the:
- Governance of CRAs and the management of conflicts of interest
- Development and application of methodologies for assessing credit risk
- Disclosure of information to ESMA and to market participants
Once registered, CRAs are subject to ongoing 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 27 CRAs. Among the 27 registered CRAs, four operate under a group structure, totaling 19 legal entities in the EU, which means that the total number of CRA entities registered in EU is 42.
Keywords: Europe, EU, Banking, Securities, CRA, CRA Regulation, DBRS Ratings, ESMA
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