European Securities and Markets Authority Issues CRA Regulation for Credit Rating Agencies

ESMA is the single direct supervisor of Credit Rating Agencies (CRAs) within the EU. The CRA Regulation introduced a common approach to the Regulation and Supervision of CRAs within the European Union. This approach was designed to enhance the integrity, responsibility, good governance and independence of credit rating activities to ensure quality ratings and high levels of investor protection. The CRA Regulation was amended in 2011 and in 2013 . There are also a number of implementing and delegated acts adopted by the European Commission and Technical Standards developed by ESMA within its scope of action, including Technical Standards for implementing the CRA Regulation. Registration and certification are core activities within ESMA’s supervisory responsibilities. For ESMA it is vitally important that the gateway to registered status is guarded diligently and applicants are granted registration only if they demonstrate their ability to meet all the regulatory requirements. The registration procedure is defined by Articles 14 to 18 of the CRA Regulation. The process is composed of two stages. In the completeness phase, the applicant is requested to submit a substantial amount of information on, inter alia, its business plans, resourcing arrangements, governance structures, policies and procedures for ensuring compliance with the CRA Regulation, as well as their rating methodologies. Commission Delegated Regulation 449/2012 with regard to regulatory technical standards on information and certification of credit rating agencies sets out the information that applicants for registration should submit to ESMA. The completeness phase is then followed by the compliance phase, when ESMA carries out a detailed analysis of whether the applicant’s proposal fully meets the requirements of the CRA Regulation. The specific timelines for both the completeness and the compliance phases are defined in Articles 15 to 18 the CRA Regulation. Commission Delegated Regulation 447/2012 laying down technical standards for the assessment of compliance of credit rating methodologies is used to assess applicants’ compliance with Article 8(3) of the CRA Regulation. Please note that ESMA may decide to reopen the completeness phase described in Article 15(4) of Regulation (EC) No 1060/2009 on the basis of the applicant’s submission of new information during the compliance phase referred to in Article 16 of that Regulation, provided that ESMA considers it appropriate and receives the written and unambiguous consent of the applicant. At the end of the compliance assessment, the decision on whether the applicant is given registered status is made by ESMA’s Board of Supervisors, which consists of senior representatives of the National Competent Authorities (NCAs) from each EU Member State. A fee will be payable at outset of the registration process. The calculation of fees, as defined by Commission Delegated Regulation EU/272/2012 (the “Fees Regulation”) is based on a several factors such as numbers of employees, whether the applicant has or plans to have branches in another Member State or third country, or whether it intends to issue ratings on structured finance instruments. If you would like to receive further information on the registration process please contact the Supervision Department at CRA-registration@esma.europa.eu Any firm that is established in the EU and that carries out credit rating activities in the EU without being registered or certified with ESMA is operating in breach of Articles 2(1) and 14(1) of the CRA Regulation. ESMA systematically takes action, including supervisory measures and fines, against firms that conduct credit rating activities without registration or, where appropriate, certification in the EU. To ensure compliance with the CRA Regulation, any firm intending to issue credit ratings in the EU must apply for registration or, where applicable, certification with ESMA. Under its perimeter strategy, ESMA uses a variety of sou