Featured Product

    ESMA Guidance on Disclosures for Credit Rating Sustainability Issues

    July 18, 2019

    ESMA published the technical advice on sustainability considerations in the credit rating market, along with the final guidelines on disclosure requirements applicable to credit ratings. ESMA, in its advice, has assessed the level of consideration of Environmental, Social, and Governance (ESG) factors in the credit rating actions in specific and the credit rating market in general. The guidelines on disclosure requirements for credit ratings are intended to improve the overall quality and consistency of the information that is disclosed following a credit rating action. ESMA will consider these guidelines for the purpose of its supervision as of March 30, 2020.

    The technical advice provides context on the role of credit ratings in EU legislation and offers an overview of the consideration of ESG factors in credit ratings. It also discusses the extent to which the consideration of factors classified as ESG was evidenced within two samples of specific credit rating actions as well as discusses the possible regulatory developments and their relevance. The technical advice found that, while credit rating agencies (CRAs) are considering ESG factors in their ratings, the extent of their consideration can vary significantly across asset classes, according to the methodology of each CRA. However, given the specific role that credit ratings have in the EU regulatory framework for the purposes of assessing credit risk, it would be inadvisable to amend the CRA Regulation to explicitly mandate the consideration of sustainability characteristics in all rating assessments. Instead, ESMA proposes for EC to assess whether there are sufficient regulatory safeguards in place for other products that will meet the demand for pure sustainability assessments.

    Among CRAs, ESMA has noted an inconsistency regarding the information that is disclosed in accordance to these requirements. Consequently, ESMA believes that it would be beneficial to collate a set of good practices in a single guidance document covering the disclosure requirements that are applicable to credit ratings’ press releases and reports. The guidelines:

    • Provide detailed guidance about what CRAs should disclose when they issue a credit rating. This will ensure a better level of consistency in terms of the critical information included in the press releases of CRAs
    • Require greater transparency on whether ESG factors were a key driver of the credit rating action. This will allow the users of ratings to better assess where ESG factors are affecting credit rating actions.

    The final report on the guidelines contains a summary of the feedback received to the consultation paper on guidelines on disclosure requirements applicable to credit ratings, alongside the responses of ESMA. Annex I to the report contains the final guidelines on disclosure requirements, Annex II to the report contains a cost-benefit analysis of the guidelines, and Annex III to the report contains the response of the Securities and Markets Stakeholders Group of ESMA to the consultation paper.

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, CRAs, Disclosure Requirements, Technical Advice, Credit Ratings, ESG, Sustainability, Guideline, EC, ESMA

    Related Articles
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    News

    MAS Issues Guidelines to Promote Senior Management Accountability

    MAS published the guidelines on individual accountability and conduct at financial institutions.

    September 10, 2020 WebPage Regulatory News
    News

    APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans

    APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.

    September 09, 2020 WebPage Regulatory News
    News

    SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks

    SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.

    September 09, 2020 WebPage Regulatory News
    News

    FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms

    FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.

    September 09, 2020 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in September 2020

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.

    September 08, 2020 WebPage Regulatory News
    News

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    OSFI published the key findings of a study on third-party risk management.

    September 08, 2020 WebPage Regulatory News
    News

    FSB Extends Implementation Timeline for Framework on SFTs

    FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.

    September 07, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5796