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The Joint Committee of the three European Supervisory Authorities (EBA, ESMA and EIOPA - ESAs) published an addendum to the joint consultation on the mapping of the credit assessments to risk weights of External Credit Assessment Institutions (ECAIs).
The consultation period will be reopened until 30 November 2014 in order to collect additional comments.
In line with the specifications included in the joint Consultation Paper published in February 2014, this addendum contains the individual mapping tables of all relevant ECAIs. The proposed mappings establish the level of capital that financial institutions should hold in order to ensure the safety and soundness of the EU financial system.
These draft mappings are based on the amount of objective information available for each ECAI regarding the performance of its credit ratings. Therefore, the draft mappings mainly reflect the historical ability of ECAIs to anticipate negative credit events. For those cases where only a small number of credit ratings were available, the draft mappings have to a large extent relied on alternative information; whereas, when no relevant information was found, a certain degree of prudence has been applied.
The addendum contains some additional aspects resulting from the cost-benefit/impact assessment analysis. The analysis shows that the proposals for the largest ECAIs are not expected to have a significant impact on financial institutions in terms of capital requirements. Only in very specific cases the average capital requirement associated with a particular ECAI might increase by up to 10%. In the case of ECAIs that currently have no mapping established, the impact is expected to reflect the true risk profile of the rated entities.
The EBA also published the individual draft mapping reports that illustrate how the rules proposed in the draft Implementing Technical Standards (ITS) were applied. The draft mappings will be reviewed in light of any comments received during the consultation process.