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    ESAs Propose to Amend Standards on Mapping of ECAI Credit Assessments

    January 29, 2021

    ESAs proposed to amend the implementing technical standards on mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk, with the consultation period ending on March 05, 2021. The draft implementing standards are intended to amend the Implementing Regulation 2016/1799 and have been developed in accordance with the Capital Requirements Regulation (CRR) and Solvency II Directive. ESAs also published individual draft mapping reports illustrating how the methodology was applied to produce the amended mappings in line with the CRR mandate.

    The amendments aim to assign mappings for two newly established ECAIs. Another aim of the amendments is to reflect the outcomes of a monitoring exercise on the adequacy of existing mappings—namely changes to the Credit Quality Steps allocation for two ECAIs and the introduction of new credit rating scales for nine ECAIs. In particular, the consultation proposes the following changes to the mapping tables:

    • Introduction of mappings for Nordic Credit Rating A.S. and INBONIS S.A, which are the two newly established ECAIs
    • Removal, from the mapping tables, of credit rating agencies that have lost ECAI status following their de-registration as a Credit Rating Agency (CRA) under the CRA Regulation
    • Amendments to credit mappings due to the re-allocation of Credit Quality Steps, for Creditreform Rating AG and GBB-Rating Gesellschaft für Bonitätsbeurteilung GmbH
    • Amendments due to the new credit rating scales for these nine ECAIs: ARC Ratings S.A., Axesor Risk Management S.L., Banque de France, Cerved Rating Agency S.p.A., CRIF Ratings S.r.l., DBRS Ratings GmbH, ICAP S.A., Rating-Agentur Expert RA GmbH, and S&P Global Ratings Europe Limited

    ESAs have proposed to amend these mappings, as the Joint Committee of ESAs is mandated under CRR to provide a correspondence or a mapping between relevant credit assessments of ECAIs and Credit Quality Steps. CRR establishes that risk-weights under the standardized approach should be based on the exposure class to which the exposure is assigned and, if applicable, its credit quality determined by reference to the credit assessments of ECAIs. According to CRR, "mappings" should be specified for all ECAIs, which are defined according to Article 4(98) CRR as CRAs registered or certified in accordance with the CRA Regulation or a central bank issuing credit ratings that are exempt from the application of CRA Regulation. 

    This change to the implementing regulation follows a second amendment, which was the ESAs proposed in May 2019 and the EC adopted on November 29, 2019. The first amendment reflected the withdrawal of the registration of one credit rating agency and the recognition of five additional credit rating agencies since the adoption of the Implementing Regulations in October 2016. The second amendment, however, reflected the outcomes of a monitoring exercise on the adequacy of existing mappings, namely changes to the Credit Quality Steps allocation for two ECAIs and the introduction of new credit rating scales for 10 ECAIs. Two ECAIs, Creditreform and ACRA Europe, have not consented to the publication of their mapping reports. In the absence of a consent, ESAs published only the outcome of the revision—that is, the relevant mappings in Annex III of the draft implementing technical standards, along with the two documents listing the applicable credit rating scales and credit rating types for each concerned ECAI. 

     

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    Comment Due Date: March 05, 2021

    Keywords: Europe, EU, Banking, Insurance, Credit Risk, CRR, Solvency II, Standardized Approach, ECAIs, CRA, Credit Quality Steps, Basel, Regulatory Capital, ESAs

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