The term “sole and mechanistic reliance on credit ratings” is mentioned in Article 5b(1) of the European Regulation on Credit Rating Agencies (Regulation (EU) No 462/2013). However, neither its formal definition nor explanations of its meaning are included in the document.
In order to have a common approach towards this issue, the ESAs have developed a definition of “sole and mechanistic reliance”, and are consulting with market participants on whether this definition is clear and can be used in practice. The consultation paper contains:
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a proposed definition for “sole or mechanistic reliance”, including examples;
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the provisions in the three ESAs’ guidelines that are not to be defined as mechanistic; and
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those provisions that are to be considered as mechanistic and therefore should be amended.
The ESAs intend to refer to this definition in all their future guidelines, recommendations and draft technical standards where relevant.
The current public consultation also contributes to the initiative of the Financial Stability Board to reduce the reliance on ratings.
The consultation will end at close of business on 5 December.
Press release
Full consultation paper
© ESMA
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