EBA press release: EBA, ESMA and EIOPA consult on draft technical standards on the mapping of ECAIs credit assessments

05 February 2014

The Joint Committee of the three European Supervisory Authorities (EBA, ESMA and EIOPA - ESAs) launched today a consultation on draft Implementing Technical Standards (ITS) on the mapping of the credit assessments to risk weights of External Credit Assessment Institution (ECAIs). These ITS will be part of the Single Rulebook in banking aimed at enhancing regulatory harmonisation across the European Union (EU). The consultation runs until 5 May 2014.

Capital requirements under the Standardised Approach are based, among other factors, on the credit quality of the exposure, which is calculated on the basis of credit assessments provided by ECAIs. These draft ITS specify the elements that should be taken into consideration to determine the correspondence (‘mapping') between risk weights and credit assessments provided by a particular ECAI.

This ‘mapping' has to be provided for all ECAIs, as defined by the Capital Requirements Regulation (CRR), including any credit rating agency that is registered or certified in accordance with the Regulation on Credit Rating Agencies (CRA) or a central bank issuing credit ratings that are exempt from the application of the CRA Regulation.

In particular, the following elements have been taken into account in the mapping process:

Specific requirements have been established for the calculation of the default rate, which should improve the objectivity and consistency of the ‘mappings';
Default experience obtained from external ratings of other ECAIs or credit scores produced by the ECAIs themselves have been considered;

In case no external or internal default rate data is available, an estimate of the quantitative factor has been required based on the assessment provided by the ECAIs;

In addition, a description of the implementation of the qualitative factors has been provided in the explanatory boxes of these draft ITS.

Legal background

The proposed draft ITS have been developed on the basis of Regulation 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.

The EBA is expected to submit these draft ITS to the European Commission by 1 July 2014.