EBA欧洲银行-ESAs-2016-41-28Joint-Opinion-on-EC-amend-ITS-ECAIs-Mapping-CRR29_53页_465kb

Summary of ESAs' Opinion on Commission's Proposed Amendments to Draft ITS

Core Content

The European Supervisory Authorities (ESAs) have issued an opinion on the European Commission's intention to amend the draft implementing technical standards (ITS) concerning the mapping of External Credit Assessment Institutions' (ECAIs) credit assessments under Article 136(1) and (3) of Regulation (EU) No 575/2013 (CRR) and under Article 109a(1) of Directive 2009/138/EC (Solvency II Directive). The ESAs reject the proposed amendments, emphasizing the importance of prudential consistency and the need to maintain financial stability.

Main Views and Key Points

• Purpose of Mapping: The primary objective of the mapping is prudential, ensuring that capital requirements are calculated accurately and consistently based on the creditworthiness of ECAIs' ratings. It is not intended to stimulate competition in the credit rating industry.

• Phase-in Period: The original draft ITS introduced a three-year phase-in period during which relaxed quantitative requirements were applied to ECAIs with limited data. This was designed to allow these institutions to build a track record while ensuring that prudential considerations are not neglected.

• Rejection of Amendments: The ESAs reject the Commission's proposal to remove the phase-in period and apply relaxed quantitative requirements indefinitely. This would undermine the prudential objectives and create an unlevel playing field, as it would allow ECAIs with limited data to operate under less stringent conditions than those with full data.

• Conservative Adjustments: The mapping methodology includes conservative adjustments based on quantitative data to ensure that capital requirements are not underestimated. These adjustments are crucial for maintaining financial stability and ensuring that the capital charges reflect the true risk levels.

• Regulatory Consistency: The mapping should be consistent with the prudential requirements of both the CRR and Solvency II Directive. The ESAs stress that the original ITS provide a balanced approach that considers both prudential and market competition objectives.

• Qualitative Factors: Qualitative factors should be used to complement quantitative data, especially when the latter is insufficient. These factors help in reviewing and enhancing the mapping, ensuring it accurately reflects the creditworthiness of rating categories.

• Default Rate Calculation: Default rates are a key quantitative factor in the mapping process. They should be calculated using a three-year time horizon to ensure a representative sample and avoid underestimating risk. Public sector ratings and issue ratings should be excluded to prevent bias.

• Rating Scale Consistency: Each ECAI's rating scale should be mapped to the appropriate credit quality steps, and the relationship between rating scales should be considered. The mapping should ensure differentiation of risk weights across exposure classes.

• Need for Review: The mapping should be reviewed periodically, especially after the phase-in period, to reflect updated quantitative data and ensure continued prudential adequacy.

Key Information

• Legal Basis: The ESAs' competence is based on Articles 34(1) of Regulations (EU) No 1093/2010, 1095/2010, and 1094/2010, which allow them to provide opinions on the mapping of ECAIs' credit assessments.

• Time Limit for Endorsement: The Commission is required to decide on the endorsement of ITS within three months of receiving the draft, which may be extended by one month. This is to ensure a smooth and expeditious adoption process.

• Annex: The original version of the draft ITS is included in the Annex of this opinion, reflecting the ESAs' position against the Commission's amendments.

• Conclusion: The ESAs believe that the proposed amendments would compromise the prudential objectives of the mapping and create risks to financial stability. They advocate for a balanced approach that ensures both prudential soundness and fair market competition.

Summary of Recommendations

• Maintain the phase-in period and apply relaxed quantitative requirements for a limited time only.
• Ensure that the mapping process includes both quantitative and qualitative factors to reflect the true risk profile.
• Apply conservative adjustments where quantitative data is insufficient.
• Use the three-year time horizon for default rate calculations and exclude public sector and issue ratings.
• Conduct periodic reviews of the mapping to reflect updated data and maintain prudential adequacy.
• Ensure consistency between the mapping methodologies used in the CRR and Solvency II Directive.