07 November 2018

ESMA publishes the responses to its Consultation on Revised Guidelines on Periodic Reporting by CRAs

BVI

BVI fully supports ESMA’s approach to collect annual information on costs and revenues per types of credit ratings and ancillary services in addition to fees and costs for credit rating related products and services sold by other entities within the group.

In particular, ESMA highlights in its last report2 on fees charged by CRAs and trade repositories key areas of concern across the CRA industries with regard to the fee provision and where improvements are needed in the CRAs practices. This involves the application of the non-discrimination and cost-based/cost-related principles such as transparency and disclosure, fee-setting process including cost monitoring and related controls and interaction with related entities. BVI’s members continue to closely observe the non-transparent price increases in the credit rating industry and the practice to enter into licence agreements which are typically made with an entity related to the registered CRA.

Therefore, collecting information on cost and revenues to the extent proposed by ESMA would lead to a better understanding of the services provided by CRAs and their entities within the group and that the regulatory objectives are met. This explicitly involves transparency of the interaction with related entities of the CRAs to avoid that these entities do not conflict with the non-discrimination and cost-based/cost-related principles laid down in the regulation.

Full BVI response

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EIU

The EIU follows a financial year calendar (April-March) in relation to revenue reporting, and so if ESMA expect a Jan-December annual financial calendar reporting schedule there may be some delays in producing financial results in time to meet ESMA deadlines.

The information required in the financials template is not clear on what is required, particularly

around cost and cost types which are details that were not obligatory to provide to ESMA in

the past. EIU would appreciate clarification on the types of information required and the level of detail expected.

Full EIU response

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Rating-Agentur Expert RA GmbH

Rating-Agentur Expert RA GmbH believes that the established risk assessment approach for ESMA supervisory activities will make the reporting process more efficient. However, it thinks that that the criteria for the assessment should be clear and transparent for CRAs. Risks, which are considered for CRAs reporting categorization, shall be disclosed.

It should be clarified how to cover bi-annual reporting period for category 2 CRAs, when the term of the agreement with the INEDs is uneven (e.g. 3, 5 or 7 years). It is not clear whether in this case INEDs shall provide their opinion for the half of the period, which is one year, before they leave the agency, and the rest half shall be provided by their successors.

Due to a small operating scale, most of CRAs use only applications, which are common for all functional divisions. Therefore, the information submitted by CRAs for each key function will be repetitive (MS Outlook, Ms Excel, DBMS, etc.). Thus, it might be more convenient to make the templates more application-centered, rather than function-oriented (IT applications and Cloud Computing).

Full Rating-Agentur Expert RA GmbH response

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Full Consultation Paper

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