CESR published two sets of guidance on the current CRA regulation. CESR also publishes a feedback statement on the consultation held to develop the guidance on registration, as well as an updated Q&A on CRAs.
European legislation
On 12th November 2008, the European Commission published a draft regulation on credit rating agencies1. The amended version of this draft regulation was approved on 23rd April 2009 by the European Parliament and on 27th July 2009 by the European Council3. The final version was published on 17th November 2009 in the EU’s Official Journal (Regulation (EC) No 1060/2009). It entered into force on 7th December 2009. Credit rating agencies operating in the Community before 7th June 2010, which intend to apply for registration under the Regulation, shall adopt all necessary measures to comply with its provisions by 7th September 2010. According to this Regulation CESR will discharge important co-ordination and advisory functions alongside its traditional role of promoting convergence through Level 3 guidelines and recommendations.
Among other tasks, according to Article 11.2 and 21.2 (d) of the Regulation, CESR shall:
- Establish a central repository (CEREP) where credit rating agencies shall make available information on their historical performance data including the ratings transition frequency and information about credit ratings issued in the past and on their changes,
- Define the standardized form in which the credit rating agencies shall provide information to that repository,
- Make that information accessible to the public and publish summary information on the main developments observed on an annual basis,
- Issue guidance on common standards on the presentation of the information, including structure, format, method and period of reporting, that credit rating agencies shall disclose.
In particular, credit rating agencies shall disclose every six months data about the historical default rates of their rating categories, distinguishing between the main geographical areas of the issuers and whether the default rates of these categories have changed over time.
CESR has to provide guidance on common standards on the presentation of historical performance data within six months of entry into force.
Goal and purpose of the central repository
Two main arguments for the creation of the CEREP were taken into account: one of them being market participants’ claim of a lack of transparency of credit rating agencies with regard to the information provided on historical performance data (e.g. rating transitions and default statistics).
In particular, it was indicated by those market participants that the data presented by the credit rating agencies have not always been complete and that credit rating agencies differ in their approaches to collecting and presenting the data.
The other, being the Regulation’s request to enhance transparency and to contribute to the protection of investors by providing information to a central repository on the past performance of credit rating agencies and about credit ratings issued in the past. Credit rating agencies should provide information to that repository in a standardised form. CESR should make that information available to the public and should publish annual summary information on the main developments observed.
© CESR - Committee of European Securities Regulators
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