July 20, 2016

ESMA Consultation on Validation and Review of Credit Rating Agencies’ Methodologies

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[author: Bethan Saunders]

On July 13, 2016 the European Securities and Markets Authority published a new consultation paper relating to Credit Rating Agency methodologies. This follows on from a discussion paper published on November 17, 2015 and an open hearing on January 25, 2016.

The consultation and review is based around CRA’s application of Articles 8(3) and 8(5) of the CRA regulation and articles 7 and 8 of the Regulatory Technical Standards. ESMA believes that publication of official guidelines will help to ensure the consistent application of validation and review measures for demonstrating the discriminatory power, predictive power and historical robustness of methodologies.

The consultation will be open for 5 weeks, and ESMA aims to finalize the proposed guidelines and publish a final report in Q1 2017.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.