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The primary scope of this letter is to advise the Commission to consider some elements in the context of the current EMIR review, in particular those related to ESMA’s supervisory and sanctioning powers under EMIR. ESMA would like to also use this opportunity to emphasise some similar aspects related to CRAs, which would benefit from a joint analysis.
In relation to the credit rating industry in the EU, on 2 October 2015, ESMA submitted to the Commission two sets of Technical Advice and a Report on the regulation of credit rating agencies (CRA Regulation 1060/2009). These papers provided an overview on the functioning of the credit rating industry and the impact of specific provisions of the CRA Regulation.
Moving from trade reporting and TRs to the other obligations under EMIR, a series of suggestions were made in our four EMIR Review Reports that ESMA believe are important to consider in the context of the EMIR Review and any related legislative proposal. In particular, ESMA identified the following aspects as essential to ensure that the regulatory framework is improved:
a) considering amendments to the clearing obligation framework and reviewing the language of the Articles setting the default management requirements and protections;
b) redefining, simplifying and recalibrating the categories of large and small non-financial counterparties and the related sets of obligations each of these two categories are subject to;
c) improving transparency and predictability of margin requirements, but considering that other proposals, such as the potential macro prudential use of margins and haircuts, are premature; and
d) reconsidering the third country CCP recognition framework in order to ensure a timely and risk based process, that the right set of safeguards are in place, and that ESMA’s costs can be adequately covered.
ESMA also invites the Commission to consider the inclusion into CRAR of amendments equivalent to those proposed for EMIR, where appropriate. We refer, for instance, to: (i) the extension of the type of enforcement decisions that can be adopted by ESMA; (ii) the removal of the requirement for ESMA to obtain judicial authorisation at national level for on-site inspections where there is no opposition from the supervised entity; (iii) the possibility for ESMA to oppose certain material changes to the conditions of registration; (iv) the obligation for CRAs to submit further periodic information to ESMA with a corresponding sanction; and (v) simplifications / clarifications of ESMA’s supervisory procedures for CRAs.