Credit rating agencies

When the UK leaves the EU, the FCA will become the UK regulator of credit rating agencies (CRAs) and any legal person wishing to issue credit ratings in the UK for regulatory purposes on or after exit day will need to be registered or certified with the FCA.

We continue to prepare for a range of scenarios, including one in which the UK leaves the EU without a withdrawal agreement in place, and therefore without an implementation period during which EU law would remain applicable in the UK.

CRAs issue credit ratings which are opinions on the creditworthiness of an issuer or security. Firms may use credit ratings in the calculation of their capital requirements and for assessing risks in investment activity.  If the UK leaves the EU without a withdrawal agreement, we will assume responsibility for registering and supervising CRAs in the UK.

The European Union (Withdrawal) Act 2018 (EUWA) will repeal the European Communities Act 1972, preserve existing UK laws which implement EU obligations and convert existing EU law at the point of exit into UK law. The EUWA allows for amendments to this retained EU legislation to ensure that it continues to operate effectively once the UK leaves the EU. It is not intended to make policy changes, other than where appropriate to reflect the UK’s new position outside the EU. 

Getting registered

To support a smooth transition to the new regime for CRAs in the UK, and minimise disruption to the users of credit ratings, the ​​​​​​Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019 (CRAR SI) prescribes several transitional processes for existing CRAs. The CRAR SI introduces both a conversion and temporary registration regime available to CRAs wishing to issue ratings in the UK on or after exit day: 

  • Registration Conversion regime. This will allow CRAs incorporated in the UK and registered with ESMA under the CRA Regulation to notify the FCA before exit day to convert their existing ESMA registration into a registration with the FCA.
  • Certification Conversion regime. CRAs certified with ESMA will be able to notify the FCA before exit day to extend their certification to the UK. 
  • Temporary registration regime (TRR). This will offer temporary registration to CRAs that submit an advance application for registration with the FCA before exit day, provided they are a UK incorporated entity and are part of the same group as a CRA with an existing ESMA registration.

For firms not making use of the above transitional processes, applications to register as a new CRA will be assessed in accordance with the usual procedures in the CRA Regulation, as brought into UK law under the EUWA.

If the UK enters an implementation period after Brexit, European Union law would remain applicable in the UK from exit day until the end of December 2020, in accordance with the withdrawal agreement, and the CRAR SI will not have effect for the duration of the implementation period. 

What CRAs should do now

In line with the FCA’s intention to prepare for a range of scenarios, including one in which the UK leaves the EU without a withdrawal agreement in place and without entering an implementation period, we are now accepting notifications to convert ESMA registrations, and notifications to convert ESMA certifications. We are also accepting advance applications for registration with the FCA.

CRAs intending on submitting notifications or advance applications should complete the relevant form as provided below, and submit this by email alongside all supporting documentation required by the form.

Notification to convert ESMA registration

If you are a UK based CRA that wishes to convert its ESMA registration into a registration with the FCA you should complete and submit the conversion form for UK CRAs (with supporting documentation) by email.

The final CRAR SI has entered into force. We have a published a direction for CRAs looking to convert their registration with ESMA in to the equivalent status with the FCA. In order to make a valid notification, CRAs must comply in full with the direction and submit the specified conversion form and all supporting documentation.

Under regulation 38 of the CRAR SI the FCA has 20 working days to determine whether the notification for conversion of registration meets the requirements to be converted or inform the firm of the steps that need to be taken and the time within which they need to be taken for the notification to be considered valid.

In order to give sufficient time for these notifications to be processed, firms should aim to submit their completed notifications, together with all supporting documentation, by midnight on 27 May 2019 in order to help ensure the continued regulatory use of their ratings in the UK after exit day. The FCA cannot guarantee that notifications submitted after this time, or incomplete notifications, will be processed by exit day.

Notification to convert ESMA certification

If you are a CRA certified with ESMA that wishes to extend its certification to the UK, you should complete and submit the conversion form (with supporting documentation) by email.

The final CRAR SI has entered into force. We have a published a direction for CRAs looking to extend their ESMA certification to the UK. In order to make a valid notification, CRAs must comply in full with the direction and submit the specified conversion form and all supporting documentation.

Under regulation 44 of the CRAR SI the FCA has 20 working days to determine whether the notification for conversion of certification meets the requirements to be converted or inform the firm of the steps that need to be taken and the time within they need to be taken for the notification to be considered valid.

In order to give sufficient time for these notifications to be processed, firms should aim to submit their completed notifications, together with all supporting documentation, by midnight on 27 May 2019 in order to help ensure the continued regulatory use of their ratings in the UK after exit day. The FCA cannot guarantee that notifications submitted after this time, or incomplete notifications, will be processed by exit day.

Advance Application for registration as a CRA, and to enter the TRR

The final CRAR SI has entered into force. We have published a direction for CRAs wishing to make advance applications to the FCA. In order to submit a valid advance application, CRAs must comply in full with the direction and submit the specified registration form and all supporting documentation. In addition, in the covering email, CRAs should confirm both of the following:

  • their intention to enter the TRR; and
  • their consent to the FCA treating the advance application from exit day as an application for registration as a credit rating agency solely for the purposes of the rules in Chapter 3 of the FCA’s Fees Manual (as they will apply from exit day).

If you are a UK based CRA that wishes to make an advance application for registration as a credit rating agency in the UK, you will need to complete and submit a registration form (with supporting documentation) by email before 11.59pm on 30 May 2019. We have also published notes to completing the form.

Your covering email should state that you wish to be included in the TRR if your application has not been determined by exit day. Note that it is a condition of the TRR that you are a UK incorporated entity and are part of the same group as a CRA with an existing ESMA registration.

The FCA has issued a direction outlining that final applications will include the registration form (with supporting documentation).

You will also be required to pay a fee of £5000 for your advance application. Full details of both our application and periodic fees can be found in Policy Statement 19/10. Your covering email should state that you consent to the FCA treating your advance application as an application for registration as a credit rating agency for the purposes of the FCA rules relating to the payment of application fees, as they will apply from exit day. We will publish details on the fee and how this can be paid in due course.

Application for a new registration

Applications to register as a new UK CRA will be assessed in accordance with the usual procedures in the CRA Regulation.

If you are a new UK-based CRA wishing to apply for registration in the UK in order to provide rating services in the UK, you should submit the completed ​​​​​​registration form with supporting documentation by email. We will process these applications from Exit day once the UK regime is in effect.

You will also be required to pay a fee of £5000 for your new registration application.  Full details of both our application and periodic fees can be found in Policy Statement 19/10.

If you have any queries, please email us.