ESMA published its annual report for 2018 and its supervision work program for 2019. The annual report provides an overview of the activities undertaken by ESMA in 2018 while the work program details key focus areas for the upcoming year for ESMA’s supervision of trade repositories, credit rating agencies (CRAs), and the monitoring of third-country market infrastructures such as third-country central clearing counterparties (CCPs) and third-country central securities depositories (CSDs).
Improvement of the quality of the rating process was one of the main priorities of ESMA in 2018. ESMA used a number of supervisory tools in this area, including dedicated investigations, remedial action plans, and thematic workstreams. ESMA’s supervisory activities and achievements in 2018 include the following:
- Supervision of eight registered trade repositories, 27 registered CRAs, and four certified CRAs
- Investigations into the rating process and the rating methodology framework of CRAs and into the development, approval, and validation of a specific model and the related rating methodology of a CRA
- Ongoing work on the contingency plans set up by CRAs and trade repositories in light of Brexit
- Finalization of the thematic review of fees charged by CRAs and trade repositories, in addition to the publication of report on the outcome of this review and the way forward
For CRAs and trade repositories in EU, ESMA uses a risk-based approach to establish its annual supervision work program, considering the main developments per industry and per registered entity. For 2019, ESMA identified the following key supervisory priorities:
- Work on CRA cybersecurity, CRA portfolio risk, and quality of the rating process
- Recognition of UK CCPs in a no-deal Brexit scenario
- Assessment of the pending applications for recognition as third-country CCPs (19) and third-country CSDs, including risk monitoring
- Work in areas in which common issues exist across trade repositories and CRAs and these issues include Brexit, fees charged by CRAs and trade repositories, the effectiveness of internal control systems, and the use of new technologies.
Keywords: Europe, EU, Banking, Securities, Supervisory Activities, Work Program, Annual Report, CRA, Brexit, ESMA
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