On 6 February 2014, the European Supervisory Authorities ("ESAs") published a joint final report on mechanistic references to credit ratings in the ESAs' guidelines and recommendations.
The ESAs are made up of the European Banking Authority ("EBA"), the European Securities and Markets Authority ("ESMA") and the European Insurance and Occupational Pensions Authority ("EIOPA").
The three ESAs were required by the CRA Regulation (Regulation 1060/2009) to review, and where appropriate to remove references to credit ratings that could trigger sole or mechanistic reliance on such ratings in existing guidelines and recommendations.
The joint final report includes the following:
- a feedback statement to the ESAs joint consultation paper (Section II);
- a definition for "sole or mechanistic reliance" (Section III);
- general examples of rating references to illustrate the concept of sole or mechanistic reliance (Section IV);
- a list of provisions from the EBA, EIOPA and ESMA guidelines and recommendations containing rating references that should not be viewed as sole or mechanistic (Section V); and
- a set of provisions that do require revision according to the ESAs, which includes ESMA's guidelines on money market funds ("MMFs") (Section VI).
The EBA, EIOPA and ESMA final report is available at: https://eiopa.europa.eu/fileadmin/tx_dam/files/consultations/consultationpapers/JC-CP- 2013- 02/JC_2014_004__Final_Report_Mechanistic_References_to_Credit_Ratings_.pdf (login required)
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