As previously outlined in Edition 2 of this Briefing, the European Regulation on Credit Rating Agencies (as amended) has been updated for a third time, to impose additional regulation upon European Credit Rating Agencies (CRAs) and those involved in the deals they rate. The so-called CRA III Regulation and an accompanying Directive were published in the Official Journal of the EU (the 'OJ') on 31 May 2013. The Regulation places new disclosure requirements on sponsors, issuers and originators of structured finance instruments (specifically including securitisations), requires structured finance instruments to be dual-rated and requires issuers to "rotate" the CRAs they use in certain deals (namely re-securitisations). It also places new burdens on CRAs themselves, subjects them to a new civil liability regime, creates a stronger role for the European Securities and Markets Authority (ESMA) in regulating CRAs across Europe, and attempts to limit over-reliance on credit ratings within Europe. The Directive amends the UCITS, IORPs and AIFM Directives to require UCITS, IORPs and AIFMs "not to solely or mechanistically rely on external credit ratings for assessing the creditworthiness of the UCITS/AIF assets… or in their investment policies…" and also requires them to conduct their own due diligence. The significance of OJ publication is that the legislation takes effect just 20 days later, so that the Regulation entered into force on 21 June 2013, while the Directive (which requires implementation in Member States) must be transposed by 21 December 2014. ESMA has recently issued a Discussion Paper seeking views on the preparation of several draft Regulatory Technical Standards that are required to fully implement the detail of CRA III, including on the specific disclosure requirements for structured finance instruments, the new European Rating Platform that will be operated by ESMA, and periodic reporting on fees by CRAs.

Useful links

CRA III Regulation (462/2013)

CRA Directive (Directive 2013/14)

ESMA Discussion Paper