ESMA publishes final guidelines on credit ratings methodologies

ESMA has published a final report on guidelines on the validation and review of credit rating agencies' (CRAs') methodologies. The report sets out ESMA's feedback on the responses it received to its consultation in July 2016 and the final guidelines.

ESMA has decided to publish guidelines on the validation and review of CRAs' methodologies based on its supervisory experience of CRAs' application of Articles 8(3) and 8(5) of the CRA Regulation, Articles 7 and 8 of the regulatory technical standards (RTS) and comments from stakeholders. The guidelines are intended to ensure a consistent application of quantitative measures used by CRAs to review their methodologies, in particular discriminatory power, predictive power and historical robustness.

The guidelines will become effective two months after their publication in all the official languages of the EU.

ESMA is required to submit draft RTS to the EU Commission by 28 February 2017. In order to meet the Commission's deadline ESMA has not had time to publish an initial discussion paper but is consulting on a first draft of the RTS based on information received from market participants. ESMA emphasises that the consultation paper and draft RTS reflect ESMA's initial reflections on the topic, given the reduced time available for delivering the draft RTS. ESMA advises that it may significantly amend the draft RTS in light of feedback before submitting to the Commission.

Comments to the consultation close 3 January 2017.