EBA欧洲银行-28Mapping-Report-EJR29_25页_726kb

Summary of Egan-Jones Ratings Company's Credit Assessments Mapping

Core Content

This report outlines the mapping of Egan-Jones Ratings Company (EJR) credit assessments under the Standardised Approach (SA) as per the Commission's Implementing Regulation (EU) 2016/1799. The mapping is based on a combination of quantitative and qualitative factors, aligning EJR's rating categories with a regulatory credit quality step (CQS) scale used for prudential purposes.

Main Rating Scales and Categories

EJR provides both long-term and short-term credit ratings, which are mapped to the CQS scale as follows:

Long-Term Credit Rating Scale

Short-Term Credit Rating Scale

Key Methodology and Rationale

• The mapping is derived using the methodology outlined in the Implementing Regulation, which includes quantitative and qualitative factors.
• Quantitative factors are based on default rates calculated from EJR's rating data between 2008 and 2015, sourced from ESMA's Central Repository (CEREP) and bilateral information from EJR.
• Qualitative factors are used to adjust the initial mapping, especially in cases where quantitative data is insufficient.
• The default definition used by EJR is consistent with the benchmark definitions, and it is estimated that over 90% of defaults are related to bankruptcy events.
• For rating categories with limited quantitative data, the mapping is based on the equivalent international rating category, ensuring prudential alignment.

Key Considerations

• Recital 12 of the Implementing Regulation emphasizes the need to support new ECAIs by relaxing the relevance of quantitative factors, thereby promoting market competition.
• The short-term ratings are mapped using the internal relationship between long-term and short-term scales, as defined by EJR. This ensures consistency in the mapping process.
• The risk weights for CQS 4, 5, and 6 are all 150%, according to Article 131 of the CRR. Therefore, short-term ratings that fall into these CQS categories are assigned the same risk weight.

Final Mapping Adjustments

• The final mapping takes into account both quantitative and qualitative factors, with qualitative factors being more significant where data is insufficient.
• The long-run default rate is calculated as the weighted average of at least 20 short-run default rates. In cases where less than 20 short-run default rates are available, they are estimated to span the required number.
• The short-run default rates are compared against monitoring and trigger benchmarks to ensure the mapping reflects the appropriate level of prudence.

Conclusion

The mapping process ensures that EJR's credit assessments are aligned with the regulatory CQS scale, promoting consistency and comparability for prudential purposes. It balances the need for prudence with the support for market entrants by allowing flexibility in the use of quantitative data. The final mapping reflects both the statistical performance of EJR and the qualitative assessment of its rating methodologies.