ESMA Supplements Guide to Endorsement Regime for Non-EU Credit Ratings
ESMA published supplementary guidance on the application of the endorsement regime for non-EU credit ratings under the Credit Rating Agencies Regulation (CRAR). To ensure that third-country credit ratings, which are endorsed for use by EU investors, meet requirements that are at least "as stringent as" those set out in CRAR, ESMA added a new section to its Guidelines on Endorsement, which were first published in November 2017. The guidelines will enter into force on January 01, 2019.
The new section aims to assist EU CRAs in assessing whether a third-country CRA’s internal requirements meet the "as stringent as" test. This is done by setting out the general principles underpinning the "as stringent as" test and providing a non-exhaustive list of alternative internal requirements, which ESMA considers to pass the test. The identified alternative requirements relate to fees charged by CRAs, analyst rotation, pre-publication of issuer notification, certain rating disclosures (transparency report, initial reviews, and preliminary ratings), and the treatment of inside information. These supplementary guidelines will ensure an effective application of the 2013 amendments to CRAR (CRA3) for endorsed credit ratings and a high level of protection of European investors who use endorsed credit ratings for regulatory purposes.
In 2017, ESMA had clarified that there are two ways for an EU CRA to ensure that an endorsed credit rating issued by a third-country CRA meets the "as stringent as" test. The EU CRA has verified, and is able to demonstrate that, either:
- the conduct of the third-country CRA fulfills the relevant endorsement provisions of CRAR; or
- the third-country CRA has established and adheres to alternative internal requirements, which are at least as stringent as the relevant endorsement provisions of CRAR.
Related Links
Effective Date: January 01, 2019
Keywords: Europe, EU, Banking, Securities, CRA Regulation, CRA, Endorsement Regime, Third Country Credit Analysis, ESMA
Previous Article
EBA Updates List of Correlated Currencies Under CRRRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.