The European Securities and Markets Authority (ESMA) has published the official translations of its final guidelines on the validation and review of credit rating agencies’ (CRAs) methodologies.
The guidelines are intended to clarify ESMA’s expectations and ensure consistent application of Article 8(3) of the CRA Regulation which states that ‘a credit rating agency shall use rating methodologies that are rigorous, systematic, continuous and subject to validation based on historical experience, including back testing’. The guidelines focus on the last part of Article 8(3) (‘subject to validation based on historical experience, including back testing’). The guidelines also clarify ESMA’s expectations and are intended to ensure consistent application of Article 8(5) of the CRA Regulation which states, inter alia, that a CRA shall ‘review its credit ratings and methodologies on an on-going basis and at least annually’.
The guidelines become effective two months after their publication on ESMA’s website in all official languages of the EU.
View Official translations of ESMA guidelines on validation and review of CRAs’ methodologies, 23 March 2017