European Association of Credit Rating Agencies
EACRA
Rating agencies have very different business models, some provide solicited ratings other unsolicited ones.
ID: 24205924101-57
Lobbying Activity
Response to Savings and Investments Union
6 Mar 2025
While the Draghi and Letta reports as well as the ESMA conference on Shaping the future of EU capital markets held on 5 February 2025 contain a lot of food for thoughts and proposals relative to the envisaged Savings and Investments Union, we noticed that credit ratings are cited usually only in the context of securitisations. We instead believe that credit ratings could act as a key enabler of this important project in order to overcome numerous obstacles: - Fragmentation of the capital market: credit ratings are supervised by ESMA on an EU wide basis and can be used for regulatory purpose by a high number of investors across the EU; - transparency: credit rating agencies contribute to more transparency in the market by providing extensive rating reports on the entities assessed; - comparability: credit rating agencies uses defined rating scales across market segments and geographies thereby allowing the comparability of numerous investment opportunities; - risk assessment: credit rating agencies task is to provide an opinion on the credit risk of an entity or its bond. Credit ratings may therefore be helpful in a risk-return analysis; - liquidity: given that credit ratings signal credit risks to investors, the credit ratings drive liquidity in rated assets; - long term investor: credit ratings can already be used by long term investors such as insurance companies, institutions for occupational retirement provision or investment firms; - combining public and private funding: credit ratings cover both of these funding sources (and combinations of these). Given that the legislative and regulatory framework on Credit Rating Agencies in the EU is now well established, we call on your institution and all Member States to consider using credit rating in all aspects of the Savings and Investments Union. Additionally, we hereby allow ourselves to propose the following measures: - Increase financial literacy of retail investors to cover credit ratings: our Members and our Association stand ready to support any initiatives covering credit ratings. We believe that retail investors should gain, amongst others, insight into the meaning of credit ratings symbols, which are associated with specific probabilities of default over time. - Modify the references to credit ratings in investment mandates to make these generic to cover all ESMA registered or certified rating agencies. By doing so, retail investors and institutional investors could invest into assets currently rated only by European rating agencies. - Provide incentives to issuers to request a rating of their entity or their issuance. This will increase funding opportunities for the issuer but also contribute to more transparency and comparability in the market. We thank you for the opportunity to comment and stand ready to provide any additional information you may require.
Read full responseResponse to Harmonisation and simplification of the delegated acts on fees charged by the ESMA to CRAs
30 Jan 2024
Dear European Commission, With reference to your this consultation dated January 3rd, 2024, we are pleased to hereby submit the views of our association, representing European credit rating agencies registered with ESMA. In parallel to this consultation on supervisory fees on Credit Rating Agencies, you are also consulting on the supervisory fees charged by ESMA to other supervised entities: Benchmark administrators, Securitisation repositories, Trade repositories under EMIR and Trade repositories under SFTR. The target of these 5 consultations is to harmonize and simplify certain technical aspects of ESMAs fee collection system so that fee collection is less complex and more uniform across sectors. Our response therefore covers 2 areas: - Common aspects of all 5 consultations and - Specific aspects relating to Credit Rating Agencies only. Attached is our response outlining the full rationale for our views. We are generally supportive of your proposals but would like to submit two amendments for your consideration. First, we note that in all 5 consultations, it is foreseen that supervisory fees charged by ESMA shall cover direct and indirect costs of supervision, the term of indirect costs being vaguely defined. We therefore propose to extend the wording in recital 3 of the draft Delegated regulation of a reasonable apportionment of the Authoritys fixed and variable overheads by adding thereafter but no more than 10% of all direct cost. Second, with respect to credit rating agencies only, we propose that credit rating agencies with a total turnover below EUR 10 mln can also provide ESMA with their accounts based on national tax law without the need for an external audit. This proposal is linked to the fact that such agencies are exempted from supervisory fees. Given that some agencies exclusively audit their accounts in order to satisfy the current requirement for audited accounts, our proposals aim is to reduce administrative costs. Last but not least, we propose that ESMA issues a clear auditing guideline defining rating activity and ancillary services in order to streamline the supervisory fee calculation process and to enhance transparency in the rating market. We thank you for the opportunity to comment on this proposed delegated regulation(s). We stand ready to provide any additional information or any clarification you may need.
Read full responseResponse to Open finance framework
12 Oct 2023
In the attached position paper, we argue that the inclusion of credit rating agencies ("CRAs") in FIDA poses material challenges to the business of CRAs but also contradicts the fundamental principles of the CRA Regulation.
Read full responseMeeting with Gilles Boyer (Member of the European Parliament, Shadow rapporteur)
9 Jan 2023 · CRR3 (staff)
Response to EU single access point for financial and non-financial information publicly disclosed by companies
28 Mar 2022
On November 25th, 2021, the European Commission tabled the Capital Markets Union Package , which includes amongst others a legislative proposal aiming at establishing the European Single Access Point (“ESAP”) for financial and non-financial information . We note that ESAP is expected to have a very extensive scope, as it should cover 21 EU Regulations and 16 EU Directives including the Credit Rating Agencies (CRA) regulation.
At the ECON Structured Dialogue on December 1st, 2021, Commissioner McGuiness stated that “the ESAP project is highly ambitious, the target being to centralize information and not to create additional red tape on information providers”. Given that public disclosures by SMEs and financial markets participants are currently scattered across a high number of sources across the European Union Member States, we in principle believe that the target to bundle information for easy access at ESAP is a good idea. In view of the expected functionalities of ESAP , CRAs may become heavy users of the ESAP if information is timely, accurate, user-friendly and well structured.
On the other hand, we are concerned with the information CRAs are expected to contribute to the ESAP as it is very specific to credit rating agencies and not directly comparable to information to be provided by other entities. This very extensive approach foreseen by the ESAP project may result in too much information being available in an unstructured manner thereby reducing the benefits to potential users .
For instance, the ESAP proposal foresees to integrate the existing Central Repository of Ratings (CEREP) and the European Rating Platform (ERP) from January 2026 onwards into the ESAP. We highlight that CEREP has not been updated since September 2019 and that information available there is not at all user-friendly . With respect to ERP, “ESMA highlights that Article 11a of the CRA Regulation has not achieved its stated objective of improving the comparability of credit ratings available in the EU and requests that the obligation for ESMA to maintain the ERP should be removed.”
We believe that the publication of credit ratings at ESAP may be counter-productive and may substantially increase complexity of the ESAP project. First, ESAP aims to make financial and non-financial information on companies easily available to users so that these can make their own analysis and assessment – by including credit ratings, users may instead mechanistically relate to these. As financial education programmes rarely cover credit ratings, users may most likely not have the appropriate knowledge regarding credit ratings. Second, credit ratings published by a CRA relate to other entities, thereby substantially increasing the technical requirements to ESAP. Finally, we are highly concerned that the current scope of the ESAP proposal does not exclude investor-pays ratings as foreseen in Article 11a (3) of the CRA Regulation.
Read full responseMeeting with Gilles Boyer (Member of the European Parliament, Shadow rapporteur) and Banco Santander, S.A.
16 Feb 2022 · CRR (staff)
Response to Facilitating small and medium sized enterprises’ access to capital
4 Feb 2022
Dear European Commission,
EACRA welcomes the above consultation paper as well as the very detailed set of questions in the targeted consultation.
One of the main objectives of the capital markets union action plan “is to ensure that companies, and in particular small and medium-sized enterprises (SMEs), have unimpeded access to the most suitable form of financing ” – the capital market for debt and equity financing can act as a complement to the financing provided by banks as the main source of financing.
As mentioned in section 2.3.3 “Research coverage for SMEs” , credit rating agencies are an integral part of the financial ecosystem in order to achieve a successful listing. We confirm that several rating agencies in Europe provide specific rating services to small and midcap companies.
We believe that credit ratings provide high value to issuers and investors. Next to the concise rating report on the respective issuers and/or the specific debt instrument, which provide a great overview over the potential credit risk profile associated with an investment, credit rating agencies quantify the credit risk by assigning a credit rating. Credit ratings therefore go well beyond an extensive prospectus document which usually lists all potential risk drivers but does not give an overall holistic assessment as credit ratings do.
Additionally, credit ratings can be used by a diversity of investors across the whole European Economic Area for regulatory purposes. Credit ratings thereby provide access to a very extensive investor base thereby contributing to competitive financing costs for the SME or MidCap company.
In consideration of the above, we hereby submit the following proposals for your kind consideration:
- An SME or MidCap company going public should contract a credit rating agency for a credit rating of the company and for a credit rating of the specific debt instrument (as the ranking of the debt instrument may not be senior unsecured, the rating of the issuer can not always be aligned with the rating of the instrument). The credit ratings should be maintained until the maturity of the issue in order to enhance liquidity on the secondary market.
- A rated SME or MidCap company may be exempted from the publication of an extensive prospectus document where the “plain vanilla” bond issuance is below EUR 50 million. For other bonds, the exemption threshold could be set at EUR 25 million.
- The exemption from market sounding rules for private placement should cover rated SMEs or MidCap companies.
- Stock exchanges should provide a discount on the listing fees for rated SMEs or MidCap companies. Stock exchanges should disclose the credit ratings on their websites.
Our proposals, when taken together, would contribute to a smooth listing process of debt instruments, reduce the overall costs to SMEs and MidCap companies and increase transparency in the EU capital market. As a positive side effect, the increased coverage of SMEs and MidCaps with ratings would reduce a key concern of banks regarding unrated corporates and the likely introduction of the output floor as proposed in the banking package implementing the Basel III reform in Europe.
Last but not least, In order to further increase the momentum towards the capital market, we would like to recall the recommendation 8 by the Technical Expert Stakeholder Group on SMEs (TSEG): “The TESG recommends to subsidise SMCs paying for a regulated credit rating to foster the development of a disintermediated debt market for SMCs.”
We thank you for your kind attention and remain at your disposal for any clarification or additional information.
Read full responseMeeting with Sebastian Kuck (Cabinet of Commissioner Jonathan Hill)
4 Mar 2015 · Credit Rating Agencies