The ITS replace the CEBS ‘Guidelines on the recognition of External Credit Assessment Institutions’. The ITS will also replace the existing mappings of External Credit Assessment Institutions' (ECAIs) credit assessments issued by the National Competent Authorities, as those mappings rely on those Guidelines.
The ‘mapping’ has to be provided for all ECAIs including any credit rating agency that is registered or certified in accordance with the CRA Regulation or a central bank issuing credit ratings that are exempt from the application of CRA Regulation. The objective is to open the market to undertakings other than the three main ones that already dominate the market.
The following aspects of these draft ITS represent a material contribution to the existing regulatory framework:
- Specific requirements have been established for the calculation of the default rate. Special attention should be paid to the minimum size of the pool that qualifies for the calculation of the default rate and to the definition of the types of default events that should be considered by the ECAI;
- Where insufficiently numerous internal default data are available, an estimate of the quantitative factor is required based on the own belief of the ECAI and taking into account the prudential purpose of the CRR;
- Special effort has been devoted to the implementation of the qualitative factors. A full characterisation of the use of such factors is not possible given the relevance of expert judgement in the mapping process.
In cases where there is limited quantitative information the ITS propose that two mappings should apply: a first mapping should apply for a limited period of 3 years; thereafter another mapping should become applicable. The quantitative factors for deriving the first mapping applicable until 31 December 2018 should be relaxed. This would allow ECAIs which present limited quantitative information to enter the market and would incentivise them to collect a sufficient number of data.