17 May 2016
The European Banking Authority (EBA) published today a Decision confirming the use of unsolicited credit assessments assigned by certain External Credit Assessment Institutions (ECAIs) for calculating institutions' capital requirements. The Decision is part of the Single Rulebook in banking and will ensure regulatory harmonisation across the European Union (EU) regarding the use of unsolicited credit ratings for determining institutions' own funds requirements.
Institutions may use unsolicited credit assessments of an ECAI for determining their capital requirements only if the EBA has confirmed that those unsolicited ratings do not differ in quality from solicited ratings of that same ECAI. Against this background, the Decision published today allows the use of unsolicited credit assessments for a number of ECAIs in the context of the Capital Requirements Regulation (CRR). In particular, going forward, the use of unsolicited ratings assigned by 22 ECAIs will be allowed, which will also support the intention of EU legislators to open the market to all registered and certified credit rating agencies.
The conclusions drawn by the EBA are based on a quantitative and qualitative analysis on both solicited and unsolicited credit assessments of ECAIs. The analysis, also published today, has not identified any evidence of differences in the quality of solicited and unsolicited credit ratings for a given ECAI. In addition, the analysis has not revealed any use of unsolicited ratings by ECAIs to put pressure on rated entities to place an order for a credit assessment or other services - which are the conditions set out in the CRR for allowing the use of unsolicited ratings.
The Decision has been developed on the basis of Article 138 of Regulation (EU) No 575/2013 (Capital Requirements Regulation — CRR), which establishes that institutions may use unsolicited credit assessments of an ECAI for the determination of capital requirements only if the EBA has confirmed that those unsolicited ratings do not differ in quality from solicited ratings of that ECAI. In particular, the EBA shall refuse or revoke the confirmation if the ECAI has used an unsolicited credit assessment to put pressure on the rated entity to place an order for a credit assessment or other services.