EBA欧洲银行-COFACE_CP07A_2页_119kb

COFACE Summary of Response to CEBS Supplementary Note on ECAI Recognition

Core Content

COFACE has provided a detailed response to the CEBS Supplementary Note to the Consultation Paper on the Recognition of External Credit Assessment Institutions (ECAI). The organization generally supports the CEBS proposals, particularly the focus on credit assessments for securitization positions and Collective Instruments Undertakings (CIU), which are specific in nature and operate in distinct markets. COFACE emphasizes the importance of both qualitative and quantitative approaches in assessing credit risk for these asset classes.

Main Views and Key Points

• Support for CEBS Proposals
  COFACE fully supports the CEBS proposals, especially the integration of qualitative and quantitative analysis in evaluating credit assessments for securitization and CIU assets.

• Qualitative Analysis

  • Qualitative analysis is considered a key element in the credit assessment of securitization and CIU assets.
  • Transparency in the initial rating process is crucial, as it can significantly influence the ECAI recognition process.
  • The issue of responsibility and potential conflict of interest must be clarified, given the strong influence of ECAI requirements on securitization structures.
  • This influence is not as pronounced in the case of rated corporates, highlighting the need for special attention in securitization and CIU contexts.

• Quantitative Analysis

  • COFACE highlights that the lack of default data can be compensated by two types of analysis: rating transitions and methodologies.
  • Rating Transitions
    • Transition matrices are important tools for evaluating the stability of ratings over time.
    • These matrices should be benchmarked against those of other asset classes, such as corporate bonds.
    • The purpose of ratings (e.g., probability of default vs. loss given default) should be taken into account when using transition matrices.
  • Methodologies
    • Full transparency on the rating methodologies and their underlying assumptions is recommended.
    • This includes the use of Merton-based models versus intrinsic models, the structure of correlations, the number of exogenous factors, and the parameters used (e.g., macro correlations).
    • Transparency on how unrated sub-assets are mapped into the rating process is also emphasized.
  • Consistency of Models
    • The consistency of ECAI rating models with the regulatory framework (e.g., CRD) should be a specific point of assessment.
    • Ensuring model consistency is vital to avoid regulatory capital arbitrage, a key objective of the Basel 2 reform.
    • If ECAI models produce significantly different risk parameters (e.g., systemic correlation), the goal of Basel 2 may not be achieved without sufficient econometric support.

Conclusion

COFACE underscores the importance of transparency and consistency in the credit assessment process for securitization and CIU assets. It advocates for a balanced approach that integrates both qualitative and quantitative methods, ensuring that ECAI assessments are reliable, robust, and aligned with regulatory objectives. The organization also stresses the need for clear guidelines on responsibility and conflict of interest, as well as the necessity of benchmarking and validating rating methodologies and transition matrices against other asset classes.