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

    APRA Publishes Proposal to Increase Transparency of Banking Data

    APRA proposed to substantially increase the volume and breadth of data it makes publicly available on authorized deposit-taking institutions, including banks, credit unions, and building societies.

    December 05, 2019 WebPage Regulatory News
    News

    ESMA Consults on Guide to Internal Controls for Credit Rating Agencies

    ESMA launched a consultation on the guidelines on internal controls for credit rating agencies (CRAs).

    December 05, 2019 WebPage Regulatory News
    News

    EU Finalizes Directive and Prudential Rules for Investment Firms

    EU published, in the Official Journal of the European Union, the Directive (2019/2034) and Regulation (2019/2033) on the prudential requirements and supervision of investment firms.

    December 05, 2019 WebPage Regulatory News
    News

    OSFI Revises Guideline on Principles for Management of Liquidity Risk

    OSFI finalized Guideline B-6 on the principles for the management of liquidity risk.

    December 05, 2019 WebPage Regulatory News
    News

    BoE, PRA, and FCA Consult to Strengthen Operational Resilience

    BoE, PRA, and FCA published a shared policy summary and coordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector.

    December 05, 2019 WebPage Regulatory News
    News

    PRA Consults on Framework to Manage Outsourcing and Third-Party Risk

    PRA published a consultation paper CP30/19 that sets out proposals to modernize the regulatory framework on outsourcing and third-party risk management.

    December 05, 2019 WebPage Regulatory News
    News

    EC Amends Rule on Mapping of External Credit Assessment Institutions

    EC published the implementing regulation (EU) 2019/2028, which amends Regulation 2016/1799, regarding the mapping tables specifying correspondence between the credit risk assessments of external credit assessment institutions (ECAIs) and the credit quality steps set out in the Capital Requirements Regulation.

    December 04, 2019 WebPage Regulatory News
    News

    EBA Issues Second Part of Advice on Implementation of Basel III in EU

    EBA published the second part of its advice on the implementation of Basel III in EU, which complements the report published on August 05, 2019.

    December 04, 2019 WebPage Regulatory News
    News

    EU Approves European Council Proposal on CCP Recovery and Resolution

    EU ambassadors approved the position of European Council on a proposed framework for clearing houses and their authorities to prepare for and deal with financial difficulties.

    December 04, 2019 WebPage Regulatory News
    News

    OSFI Releases Guideline on Foreign Bank Branch Deposit Requirements

    OSFI released the final version of Guideline A-10 on foreign bank branch deposit requirements, along with guideline impact analysis statement.

    December 04, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4263