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June 26, 2018

ESMA published the responses received to its consultation on draft guidelines on “as stringent as” notion in the CRA Regulation. The consultation was issued on March 27, 2018 and comment period ended on May 25, 2018. ESMA published responses from four institutions, three of which are credit rating agencies—namely, Rating-Agentur Expert RA GmbH, A.M. Best Europe-Rating Services Limited, and Moody's Investors Service Ltd. U.S. Chamber of Commerce, Center for Capital Markets Competitiveness, was the other respondent.

This consultation followed on from the updated Guidelines on endorsement (November 2017) and was in response to requests from the industry.  The aim of the proposed supplementary guidance is two-fold:

  • To provide clarity regarding the general principle, ESMA relies on when assessing whether an alternative requirement can be considered as stringent as a requirement set out in the CRA Regulation
  • ESMA’s concrete assessment of a number of alternative internal requirements, which are in place in a third-country credit rating agency (CRA)

In the updated guidelines on endorsement, ESMA had clarified that compliance with the third-country legal framework will no longer be considered proof that a third-country CRA fulfills requirements that are at least as stringent as those set out in the CRA Regulation. Instead, an endorsing CRA has two options to demonstrate to ESMA that the "as stringent as" condition is met: either stating that the third-country CRA complies with the relevant provisions of CRA Regulation or stating that the third-country CRA has established and fulfills alternative internal requirements, which are at least as stringent as the relevant endorsement provisions of CRA Regualtion.

Related Link: Consultation and Responses

Keywords: Europe, EU, Securities, CRA Regulation, Endorsement Regime, Responses to Consultation, ESMA

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