The report analyses the possibility, cost, and benefit of establishing one or more mappings for the European Rating Platform (ERP). The objective of a mapping is to assist the user in comparing ratings assigned by different credit rating agencies (CRAs) to the same entity or instrument. Three policy options are considered:
- Mapping by harmonising existing rating scales;
- Mapping by comparing ratings of different CRAs based on past performance;
- Refraining from mapping and letting the ERP user carry out assessments independently based on available tools and data.
The report concludes that the first option is unlikely to yield the desired benefits, as harmonised rating scales would misrepresent credit ratings in light of different rating methodologies.
Furthermore, the report concludes that the second option, can be carried out in several different ways with different outcomes depending on the applied assumptions and the specific parameters of comparison. However, one single way of mapping would not be appropriate for every rating user at every point in time. Based on experiences from other mapping exercises, option two is also likely to be costly.
Consequently, the report recommends that the European Commission takes no further action at this point in time and that a mapping is not carried out for the ERP. Instead, ESMA should focus on continually updating and improving the information, data and tools which ESMA makes available on CEREP and ERP (the third option), thus allowing users of credit ratings to carry out their own research and analysis adapted to their individual needs and interests.