On November 15, 2016, ESMA published its final Report on Guidelines on how Credit Rating Agencies should review and validate their methodologies. The CRA Regulation requires CRAs to review their methodologies, as well as quantitative and qualitative techniques used as part of the validation of the methodologies, to ensure that they are rigorous, systematic and continuous and subject to validation based on historical experience. The Guidelines clarify ESMA's expectation that a CRA must review its credit ratings and methodologies on an ongoing basis and at least annually. The Guidelines focus in particular on quantitative measures, and the purpose of the Guidelines is to increase the quality of such quantitative measures used by requiring CRAs to review their methodologies and to support the RTS on ratings methodologies. The Report follows a consultation published by ESMA on July 13, 2016. The Report provides a summary of the responses received and a qualitative assessment of the potential costs and benefits of the Guidelines. The Guidelines are to be translated into the official languages of the EU and will apply two months after the date of publication of those translations on ESMA's website.
ESMA's Final Report is available at: https://www.esma.europa.eu/sites/default/files/library/2016-1575_final_report_on_guidelines_on_the_validation_and_review_of_cras_methodologies_4.pdf .
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