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Commission Delegated Regulation (EU) No 449/2012 of 21 March 2012 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards on information for registration and certification of credit rating agencies (Text with EEA relevance)

EU Regulation No 449/2012 · Adopted 21 March 2012 · Extends to United Kingdom

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Commission Delegated Regulation (EU) No 449/2012

of 21 March 2012

supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards on information for registration and certification of credit rating agencies

(Text with EEA relevance)

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THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agenciesf1, and in particular points (a) and (b) of Article 21(4) thereof,

Whereas:

(1)

In accordance with the general objectives of Regulation (EC) No 1060/2009, in particular the contribution to the quality of credit ratings issued in the Union, financial stability, consumer and investor protection, this Regulation should ensure that the information to be submitted to the European Securities and Markets Authority (ESMA) during the registration and certification processes, is provided following uniform rules, so that ESMA is able to make an informed decision on the registration or certification of a credit rating agency.

(2)

The longer-term benefits of the additional information are expected to outweigh any potential additional short-term costs of registration, in terms of investor protection and financial stability.

(3)

This Regulation should set out the information that ESMA is to receive as part of an application for registration by a credit rating agency. Certain information requested in this Regulation might not be applicable to a newly established credit rating agency because it might have applied for an exemption, lack previous experience in the credit rating business, or other reasons. This Regulation should not create a barrier of entry to newly established credit rating agencies willing to enter the market. Nevertheless, an applicant should provide a clear explanation for not submitting any specific information contained in that application.

(4)

Any information submitted to ESMA should be provided in a durable medium which enables its storage for future use. In order to facilitate the identification of the information submitted by a credit rating agency, all documents should be identified by a reference number.

(5)

In order for ESMA to assess if any conflicts of interest arising from the activities and business interests of the owners of a credit rating agency might affect the independence of a credit rating agency, a credit rating agency should be required to give information regarding its owners activities and the ownership of its parent undertaking.

(6)

A credit rating agency should provide information on the composition, functioning and independence of its governing bodies in order for ESMA to be able to assess whether the corporate governance structure ensures the independence of the credit rating agency and the avoidance of conflicts of interest.

(7)

In order to allow ESMA to assess the good repute as well as the experience and skills of the senior management, a credit rating agency should provide the curriculum vitae, recent criminal record and self-declarations on the good repute of its senior management.

(8)

For the purposes of assessing how conflicts of interest are eliminated or managed and disclosed, a credit rating agency should provide ESMA with an up-to-date inventory of existing and potential conflicts of interest covering at least the conflicts arising from the carrying out of ancillary services, the outsourcing of rating activities and the interaction with related third parties. When identifying the conflicts of interest for the inventory, a credit rating agency should consider conflicts of interest which might arise from entities which belong to the global group of undertakings to which it belongs. Therefore, intra-group arrangements concerning allocation of tasks and the provision of ancillary services by different entities within the group of undertakings should be taken into consideration.

(9)

Although the branches of a credit rating agency established in the Union are not legal persons, those agencies should provide separate information as regards their branches so as to enable ESMA to clearly identify the position of the branches in the organisational structure, assess the fitness and appropriateness of the senior management of the branches and evaluate whether the control mechanisms, compliance and other functions in place, are considered to be robust enough to identify, evaluate and manage the branches’ risks in an appropriate manner.

(10)

The information requested regarding possible conflicts of interests with ancillary services should refer to all businesses of the credit rating agency which are not part of the rating activities.

(11)

In order to enable ESMA to assess whether a third-country regulatory framework for CRAs may be considered ‘as stringent as’ the Union regime in place, a credit rating agency intending to endorse ratings issued in that third country should provide ESMA with detailed information on the third-country regulatory framework and how it compares to the Union regime in place. Where such information is already available to ESMA, from other applications for endorsement, and ESMA takes the view that the third-country regulatory framework may be considered to be as stringent as the Union regime in place, the applicant credit rating agencies should be exempted from submitting this information. In any case, the applicant credit rating agencies shall demonstrate that the conduct of credit rating activities by the third-country credit rating agency resulting in the issuing of the credit rating to be endorsed fulfils the requirements under the third-country regime and that there are procedures to monitor the conduct of credit rating activities by the third-country credit rating agency.

(12)

This Regulation should set out the information that a credit rating agency must provide in its application for certification and for the assessment of its systemic importance to the financial stability or integrity of financial markets referred to in Article 5 of Regulation (EC) No 1060/2009. The systemic importance of the credit rating agency and its rating activities to the stability of one or more Member States should be measured in this Regulation in terms of the size of its rating activities and interconnectedness of the users of its credit ratings in the Union.

(13)

This Regulation is based on the draft regulatory technical standards submitted by ESMA to the Commission pursuant to the procedure laid down in Article 10 of Regulation (EU) No 1095/2010 of the European Parliament and of the Councilf2.

(14)

ESMA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the opinion of the Securities and Markets Stakeholder Group established under Article 37 of Regulation (EU) No 1095/2010,

HAS ADOPTED THIS REGULATION:

Annotations to the whole text

Modifications

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The “appropriate regulator” has power to make such provision as they consider appropriate by means of an instrument in writing to prevent, remedy or mitigate any failure of the provisions of this Regulation to operate effectively or any other deficiency arising from the withdrawal of the United Kingdom from the EU, see The Financial Regulators' Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 (S.I. 2018/1115), regs. 2, 3, Sch. Pt. 1 (with saving on IP completion day by S.I. 2019/680, regs. 1(2), 11; 2020 c. 1, Sch. 5 para. 1(1))

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Regulation: power to modify conferred (11.7.2023) by Financial Services and Markets Act 2023 (c. 29), ss. 3, 86(3), Sch. 1 Pts. 1, 3; S.I. 2023/779, reg. 2(d)

Footnotes

f1

OJ L 302, 17.11.2009, p. 1.

f2

OJ L 331, 15.12.2010, p. 84.

Contents

  1. Chapter 1: SUBJECT MATTER
  2. 1Subject matter
  3. Chapter 2: REGISTRATION
  4. General
  5. 2Format of the application
  6. 3Attestation of the accuracy and completeness of the application
  7. 4Number of employees
  8. 5Class of credit ratings
  9. 6Policies and procedures
  10. 7Identification, legal status and class of credit ratings
  11. Ownership structure
  12. 8Owners and parent undertaking of a credit rating agency
  13. 9Ownership chart
  14. Organisational structure and corporate governance
  15. 10Organisational chart
  16. 11Organisational structure
  17. 12Corporate governance
  18. Financial resources for the performance of credit rating activities
  19. 13Financial reports
  20. Staffing and compensation
  21. 14Staffing policies and procedures
  22. 15Fitness and appropriateness
  23. Issuance and review of credit ratings
  24. 16Development, validation, review and disclosure of rating methodologies
  25. 17Issuance of credit ratings
  26. 18Monitoring of credit ratings
  27. Description of issue and review procedures and methodologies
  28. 19Credit rating presentation requirements
  29. Conflicts of interest
  30. 20Independence and avoidance of conflicts of interest
  31. 21Inventory of conflicts of interest
  32. 22Conflicts of interest with respect to ancillary services
  33. Programme of operations
  34. 23Information regarding the programme of operations
  35. Use of endorsement
  36. 24Expected use of endorsement
  37. Outsourcing
  38. 25Outsourcing requirements
  39. Chapter 3: CERTIFICATION
  40. Application for certification
  41. 26Information for application for certification
  42. 27General requirements for the application for certification
  43. Systemic importance
  44. 28Systemic importance
  45. Chapter 4: FINAL PROVISIONS
  46. 29Entry into force
  47. Signature
  48. Annex I
  49. DOCUMENT REFERENCES(Article 2)
  50. Annex II
  51. (Article 7)
  52. 1Division 1
  53. 2Division 2
  54. 3Division 3
  55. 4Division 4
  56. 5With respect to the contact person(s) for the purpose of the application:
  57. 6With respect to the Compliance Officer:
  58. 7Division 7
  59. 8Division 8
  60. 9Division 9
  61. 10Financial reports:
  62. 11Number of employees (excluding employees located in branches) as at the date of application and as at the close of each of the three most recent financial years, reported in the following categories:
  63. 12If a credit rating agency has branches, with respect to each branch:
  64. 13Division 13
  65. Annex III
  66. (Article 8)
  67. 1Identification of the credit rating agency owners referred to in Article 8(1) with the following level of detail:
  68. 2Description of the business activities of the credit rating agency owners referred to in Article 8(1):
  69. 3Identification of the business activities of the companies in which the owners referred to in Article 8(1) have an interest according to Article 8(2):
  70. 4Identification of the owners of the parent undertaking referred to in Article 8(3):
  71. Annex IV
  72. (Article 11)
  73. 1A credit rating agency shall provide the following information regarding policies and procedures referred to in Article 11(1):
  74. 2Where the arrangements referred to in point 1 of this Annex are carried out at group of undertakings level, a credit rating agency shall provide ESMA with a copy of relevant service level agreements that it has entered into, or proposes to enter into, with other group members, and the following information:
  75. 3With respect to the compliance function, a credit rating agency shall provide the following information:
  76. 4With respect to the internal audit function carrying out the tasks described in point 10 of Section A of Annex I to Regulation (EC) No 1060/2009, a credit rating agency shall provide the following information:
  77. Annex V
  78. (Article 12)
  79. 1Identification of the members of the administrative or supervisory board and other committees as established in Article 12(3):
  80. 2Identification of the independent members of the administrative or supervisory board as established in Article 12(3) and justification of their independence if they are independent members and of their in-depth knowledge and experience at a senior level of the market in structured finance instruments, where the credit agency applies to issue credit ratings of structured finance products, according to Section A(2) of Annex I to Regulation (EC) No 1060/2009:
  81. 3A credit rating agency shall provide to ESMA a copy of the following documents as established in Article 12(4):
  82. Annex VI
  83. SELF DECLARATION(Article 15(2))
  84. Annex VII
  85. (Articles 16, 17 and 18)
  86. 1The information regarding the policies and procedures referred to in Article 16(2)(a) regarding the development, validation and review of the CRA’s rating methodologies shall include:
  87. 2The information regarding the policies and procedures referred to in Article 17(1)(c) regarding the issuance of credit ratings shall include:
  88. 3The information regarding the policies and procedures referred to in Article 17(1)(e) regarding the disclosure of a rating decision shall include the following:
  89. 4The information regarding the policies and procedures referred to in Article 18(a) regarding the monitoring of ratings shall include:
  90. Annex VIII
  91. INDEPENDENCE AND AVOIDANCE OF CONFLICTS OF INTERES(Article 20)
  92. Annex IX
  93. (Article 23)
  94. Business concept/Business development
  95. 1The following information regarding the CRA’s business activities:
  96. Class of credit ratings
  97. 2The following information regarding the class of credit ratings:
  98. Financial plan
  99. 3Projections for:
  100. 4Division 4
  101. Corporate governance
  102. 5Number of members of the following bodies:
  103. Outsourcing
  104. 6Division 6
  105. Human Resources/Staffing
  106. 7Number of permanent and temporary employees working for the following functions and their seniority:
  107. 8The following information:
  108. Annex X
  109. (Article 11)
  110. Record keeping
  111. 1Information regarding the policies and procedures regarding the record keeping obligations set out in Article 8(4) and point 7 of Section A and points 7, 8 and 9 of Section B of Annex I to Regulation (EC) No 1060/2009:
  112. Continuity and regularity of the activities
  113. 2Information regarding the continuity and regularity in the performance of the credit rating activities as set out in point 8 of Section A of Annex I to Regulation (EC) No 1060/2009, including:
  114. Information processing systems
  115. 3Information regarding the information processing systems as set out in point 8 of Section A of Annex I to Regulation (EC) No 1060/2009, including:
  116. Annex XI
  117. (Article 24)
  118. Third-country credit rating agency
  119. 1The following information for each relevant third-country credit rating agency:
  120. 2Division 2
  121. Assessment of the third-country regulatory regime
  122. 3In relation to each relevant third-country jurisdiction, detailed information, structured analysis and reasoning for each requirement set out in Articles 6 to 12 of Regulation (EC) No 1060/2009, including any reference to the relevant sections of the third-country law/regulation.
  123. Procedures to monitor conduct
  124. 4Division 4
  125. Objective reasons
  126. 5Division 5
  127. Legislation in the third country
  128. 6Division 6
  129. Annex XII
  130. (Article 28)
  131. 1A credit rating agency shall provide ESMA with the volume of outstanding credit ratings it has issued with the details set out in the following table. The information regarding the corporate rating and sovereign and public finance ratings shall be provided on the basis of number of credit ratings and the information regarding structured finance ratings shall be provided on the basis of the amount (in millions of euro) of issuing of the structured finance instruments.
  132. 2A credit rating agency shall provide information on the annual revenues generated in any European Union Member State and in other countries outside the European Union for the past three years with the following level of detail: