The final text of the Regulation further amending the EU Regulation on Credit Rating Agencies (CRA III) has been approved following a European Parliament vote, and is awaiting publication in the Official Journal of the EU (it will enter into force directly within EU Member States 20 days after such publication). Some of the key provisions of CRA III create additional burdens, not only for CRAs themselves, but also for originators, sponsors and issuers of securitisation transactions. Some of the key provisions of CRA III which impact structured finance transactions may be summarised as follows:
- Article 6b: requires originators or issuers of "re-securitisations" (but helpfully not other types of structured finance instrument as originally proposed) to rotate the CRAs rating their securities every four years;
- Article 8a: requires issuers (or originators/sponsors) of structured finance instruments to disclose more information (including on the credit quality and performance of the underlying assets, the transaction structures, cash flows and any collateral) to the market via a new webpage that will be set up and run by the European Securities and Markets Authority;
- Article 8b: requires issuers to engage at least two CRAs from separate groups to rate every transaction (although this is typically being done in practice already in many European transactions); and
- Article 35: allows both investors and issuers to bring civil liability claims against CRAs in national courts for damage caused by an intentional or grossly negligent infringement of the CRA Regulation if it has an impact on the rating outcome.
CRA III Regulation final text