The Capital Requirements Directive (CRD) allows institutions to use external credit assessments to determine the risk weight of their exposures, provided the External Credit Assessment Institutions (ECAIs) that produce those assessments have been recognised as eligible for that purpose by the competent supervisory authorities. This recognition is granted only if the competent authorities judge an ECAI to meet the recognition criteria laid down in the CRD. Where an ECAI is registered as a credit rating agency (CRA) in accordance with Regulation (EC) No 1060/2009 of 16 September 2009 on CRAs, the competent authorities shall consider the requirements of objectivity, independence, ongoing review and transparency with respect to its assessment methodology to be satisfied.

The paper sets out CEBS’s proposed common approach to the recognition
of eligible ECAIs. This covers:
• The recognition process;
• The implementation of the CRD recognition criteria; and
• The criteria for 'mapping' external credit assessments to the CRD risk weights.

The guidelines detail the high degree of convergence that has been achieved among supervisors on both the procedural and substantive aspects of ECAI recognition. This includes a significantly enhanced common understanding of the recognition criteria set out in the CRD and of their implementation across the EU. The intent of the guidelines is to provide the basis for consistent decision-making across jurisdictions, enhance the single-market level playing field, and reduce administrative burdens for all participants, including potentially eligible ECAIs, institutions, and supervisory authorities.

The guidelines set out agreed procedures for the application and assessment process. Two modes of supervisory recognition are set out in the CRD: direct and indirect recognition. In direct recognition, supervisors make their own evaluation of an ECAI's compliance with the recognition criteria. In indirect recognition, supervisors recognise an ECAI based on recognition in another Member State, without carrying out their own evaluation process. CEBS considers both of these approaches to be important and notes that indirect recognition can be a valuable instrument for enhancing efficiency and reducing administrative burdens. CEBS believes that the common understanding set out in the guidelines will provide a sound foundation for supervisors' use of the indirect recognition approach in relevant circumstances.

Where recognition is sought in more than one Member State, competent authorities will cooperate in a joint assessment process. The aim of the joint assessment process is to reach a shared view on compliance with the recognition criteria, while respecting the requirements of the CRD for individual decisions by supervisors.


CEBS participated as an observer to the Committee of European Securities regulators (CESR) task force on Credit Rating Agencies, which drafted technical advice to the European Commission on possible measures concerning credit rating agencies in March 2005. The dialogue between the two Committees has continued since then, in order to ensure complementary approaches.

Full guidelines