Delegated regulation 2012/449 - Supplement to Regulation 1060/2009 with regard to regulatory technical standards on information for registration and certification of credit rating agencies - Main contents

EN

Official Journal of the European Union

L 140/32

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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 Council (2).

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,

registration, as set out in Annex II to Regulation (EC) No 1060/2009; or

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.

sovereign and public finance ratings;

structured finance ratings;

corporate ratings:

an indication of who is responsible for the approval and maintenance of the policies and procedures;

a description of how compliance with the policies and procedures will be enforced and monitored and who is responsible for this;

a description of the measures undertaken in the event of a breach of the policies;

an indication of the procedure for reporting to ESMA a material breach of the policy or procedure which may result in a breach of the conditions for initial registration or certification.

the information listed in Annex II to this Regulation;

an excerpt from the relevant commercial or court register, or other form of evidence of the place of incorporation and scope of business activity of the credit rating agency, as of the application date.

a list of each person who directly or indirectly holds 5 % or more of the credit rating agency’s capital or of voting rights or whose holding makes it possible to exercise a significant influence over the management of the credit rating agency;

the information set out in points 1 and 2 of Annex III in relation to each such person.

a list of any undertakings in which a person referred to in paragraph 1 holds 5 % or more of the capital or voting rights or over whose management that person exercises a significant influence;

an identification of their business activity referred to in point 3 of Annex III.

identify the country where the parent undertaking is established;

indicate whether the parent undertaking is authorised or registered and subject to supervision.

reporting to the compliance officer of any situations where one of the persons referred to in point 1 of Section C of Annex I to Regulation (EC) No 1060/2009 considers that any other such person has engaged in conduct that he or she considers illegal, pursuant to the provisions of point 5 of Section C of Annex I to Regulation (EC) No 1060/2009;

the rotation of lead rating analysts, rating analysts and persons approving credit rating;

the compensation and performance evaluation practices for rating analysts, persons approving credit ratings, senior management and the compliance officer;

the training and development relevant to the rating process, including any examination or other type of formal assessment required for the conduct of rating activities.

a description of the measures in place to mitigate the risk of over-reliance on individual employees;

for each class of credit ratings, information on the size and experience of the quantitative teams responsible for developing and reviewing methodologies and models;

the name and function of any employee of the credit rating agency who has obligations, either individually or on behalf of the credit rating agency, to any other entity within the group of credit rating agencies;

the average annual fixed and variable remuneration of the rating analysts, lead analysts and the compliance officer for each of the preceding three financial years.

members of senior management;

persons appointed to direct the business of the branches;

officers responsible for internal audit, internal control, compliance function, risk assessment and review function.

a recent criminal-record file from the country of origin of the relevant person, unless the relevant national authorities do not issue such a file;

a self-declaration of their good repute including at least the statements set out in Annex VI and signed by the individual.

information regarding the development, validation and review of its rating methodologies, including at least the information set out in point 1 of Annex VII;

information regarding the disclosure of the credit methodologies and descriptions of models and key rating assumptions used in its credit rating activities as set out in point 5 of Part I of Section E of Annex I to Regulation (EC) No 1060/2009.

the rating nomenclatures used for each class of credit rating;

the definition of any rating action and statuses used by the credit rating agency;

its policies and procedures regarding the issuance of credit ratings, including at least the information set out in point 2 of Annex VII;

the terms of reference of any rating committees;

a description of the arrangements in place for disclosing a rating decision, including at least the information set out in point 3 of Annex VII;

a description of the procedures in place to ensure that a methodology is applied and implemented consistently across classes of credit rating, offices and regions.

details and criteria for the selection of data providers;

details on the reliability of internal and external data input into rating models;

details of the data sources used.

the monitoring of ratings, identifying any differences between solicited and unsolicited ratings, and including at least the information set out in point 4 of Annex VII;

the disclosure of the decision to review or change a rating;

the monitoring of the impact of changes in macroeconomic or financial market conditions on credit ratings as described in Article 8(5) of Regulation (EC) No 1060/2009.

policies and procedures with respect to the credit rating disclosure requirements laid down in the following provisions of Regulation (EC) No 1060/2009:

where the credit rating agency rates structured instruments, policies and procedures with respect to the following provisions of Regulation (EC) No 1060/2009:

samples of typical credit rating reports or other documents demonstrating how the credit rating agency meets or intends to meet these disclosure requirements; and

samples of typical rating letters for each class of credit rating produced by the credit rating agency.

any potential conflicts of interest with related third parties;

any potential conflicts of interest arising from the carrying out of ancillary services and the outsourced rating activities;

its policies with respect to outsourcing;

an explanation on how it intends to identify, manage and monitor the risks posed by the outsourcing of important operational functions;

a copy of the outsourcing agreements between the credit rating agency and the entity to which the activities are outsourced;

a copy of any internal or external report on the outsourced activities issued in the past five years.

the general information requested in points 1 to 10 of Annex II;

the information regarding its owners referred to in Article 8;

the organisational chart referred to in Article 10;

details on the arrangements in place to prevent, disclose and mitigate any existing or potential conflicts of interest between the rating business and ancillary services;

the information referred to in Article 13 regarding the credit rating agency’s financial resources.

for the preceding three years, the number of employees contracted and involved in the rating and ancillary services both permanent and temporary;

if the applicant has a branch, the number of employees involved in the rating and ancillary business in each branch;

the number of rating analysts contracted to the applicant including, if the credit rating agency has a branch, the number of rating analysts contracted in each branch;

if a credit rating agency is planning to establish a new branch, a description of the type of business activities the new branch is expected to conduct, its full name and address and the timeframe for its establishment;

if a credit rating agency is planning to conduct any new ancillary services, a description of the new services and the timeframe for their commencement;

the revenue generated over the past three years by the credit rating agency from rating and ancillary services as a proportion of total revenue, presented on a financial year basis;

if the credit rating agency has one or more branches, the revenue generated over the past three years by each branch as a proportion of total revenue, presented on a financial year basis.

the class of credit ratings;

the rating nomenclatures used for each class of credit rating;

the definition of any rating action and statuses used by the credit rating agency;

details of whether the credit rating agency produces solicited or unsolicited ratings or both;

for each class of credit rating, the number of years of experience it has in producing these ratings;

for each class of credit rating, the current or expected proportion of public ratings and private ratings.

Full name

Country of establishment

Address of registered office

Legal status

With respect to the contact person(s) for the purpose of the application:

With respect to the Compliance Officer:

Description of the business activities the credit rating agency conducts, including ancillary services, and if it has one or several branches or subsidiaries, the business conducted by each branch or subsidiary

Identification of the class of credit ratings according to the categories specified in Article 5 for which the credit rating agency applies to be registered

Identification of the regulated markets where the credit rating agency is listed, if applicable

Financial reports:

Number 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:

If a credit rating agency has branches, with respect to each branch:

List of countries from which the credit rating agency intends to endorse credit ratings

Identification of the credit rating agency owners referred to in Article 8(1) with the following level of detail:

Description of the business activities of the credit rating agency owners referred to in Article 8(1):

Identification 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):

Identification of the owners of the parent undertaking referred to in Article 8(3):

A credit rating agency shall provide the following information regarding policies and procedures referred to in Article 11(1):

Where 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:

With respect to the compliance function, a credit rating agency shall provide the following information:

With 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:

Identification of the members of the administrative or supervisory board and other committees as established in Article 12(3):

Identification 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:

A credit rating agency shall provide to ESMA a copy of the following documents as established in Article 12(4):

has been convicted of any criminal offence;

has been subject to or has been notified of any proceedings of a disciplinary nature brought by a regulatory body or of a criminal nature;

has been subject to any adverse finding in civil proceedings in connection with the provision of financial services, misconduct, fraud or the management of a legal entity;

has to his or her knowledge been subject to any existing or previous investigation by any regulatory authority or government bodies or agencies;

has been involved with an undertaking whose registration or authorisation was withdrawn by a regulatory body;

has been refused the right to carry on activities which require registration or authorisation by a regulatory body;

has been involved in the management of an undertaking which has gone into insolvency, liquidation or administration while this person was connected to the undertaking or within a year of the person ceasing to be connected to the undertaking;

has been involved with an undertaking which was investigated or suspended by a regulatory body and which resulted in an enforcement action;

has been investigated, suspended or sanctioned by a regulatory body;

has been disqualified from acting as a director, disqualified from acting in any managerial capacity, dismissed from employment or other appointment in an undertaking as a consequence of allegations of misconduct or malpractice.

The 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:

The information regarding the policies and procedures referred to in Article 17(1)(c) regarding the issuance of credit ratings shall include:

The information regarding the policies and procedures referred to in Article 17(1)(e) regarding the disclosure of a rating decision shall include the following:

The information regarding the policies and procedures referred to in Article 18(a) regarding the monitoring of ratings shall include:

the identification, prevention, disclosure and mitigation of conflicts of interests arising from the issuing of credit ratings or the provision of ancillary services as set out in point 1 of Section B of Annex I to Regulation (EC) No 1060/2009;

the segregation from the rating process of discussions related to fees received from rated entities and related third parties as set out in Article 7(2) of Regulation (EC) No 1060/2009;

the determination of fees charged by credit rating agencies to rated entities and related third parties; the control of the confidential information obtained from, or shared with, all rated entities, related third parties and other relevant individuals, as required by point 3 of Section C of Annex I to Regulation (EC) No 1060/2009;

the requirements set out in point 2 of Section C of Annex I to Regulation (EC) No 1060/2009 regarding the trading in securities rated by the credit rating agency or which are securities representing obligations of an entity rated by the credit rating agency, containing information on how the credit rating agency identifies, for each credit rating outstanding, the employees involved in the rating process at any level or function;

the requirement set out in point 4 of Section C of Annex I to Regulation (EC) No 1060/2009 regarding the acceptance of money, gifts or favours; and

the rules on the termination of a rating analyst’s employment set out in points 6 and 7 of Section C of Annex I to Regulation (EC) No 1060/2009.

The following information regarding the CRA’s business activities:

The following information regarding the class of credit ratings:

Projections for:

The credit rating agency shall separate the revenues of the rating activities from the ancillary services in the projections for the revenues. If the credit rating agency has, or plans to establish, branches, the revenue from each branch shall be indicated.

Number of members of the following bodies:

A description of the activities planned to be outsourced, and identification of the entities to which the activities are planned to be outsourced and an explanation of the reasons for outsourcing. If any activity is outsourced from a branch, this should be indicated.

Number of permanent and temporary employees working for the following functions and their seniority:

The following information:

Information 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:

Information 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:

Information regarding the information processing systems as set out in point 8 of Section A of Annex I to Regulation (EC) No 1060/2009, including:

The following information for each relevant third-country credit rating agency:

An organisational ownership chart of each credit rating agency, its subsidiaries, branches, parent undertaking and subsidiaries controlled by the parent undertaking involved in the process of issuing ratings for which endorsement is envisaged.

In 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.

The obligation set out in the first subparagraph of this point shall not apply where ESMA is satisfied that the requirements of the third-country regime are as stringent as the requirements set out in Articles 6 to 12 of Regulation (EC) No 1060/2009.

A description of the measures put in place by the endorsing credit rating agency to monitor that the third-country credit rating agency is fulfilling such requirements and to monitor any potential concerns identified by the endorsing credit rating agency with respect to the fulfilment of such requirements.

An indication of objective reasons for credit ratings to be issued in a third country.

Evidence that public authorities are not entitled to interfere with the content of credit ratings and methodologies used by credit rating agencies incorporated in each relevant third-country jurisdiction.

A 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.

A 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:

Member States shall be individually identified.