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. In the event there is no ratified withdrawal agreement, the FCA will assume responsibility for registering and supervising CRAs in the UK when the UK leaves the EU on 29 March 2019 (exit day).

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 draft Credit Rating Agencies (Amendments etc.) (EU Exit) Regulations 2018 (CRAR SI) prescribes several transitional processes for existing CRAs. The draft 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 29 March 2019 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 our 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 draft advance applications for registration with the FCA, draft notifications to convert ESMA registrations, and draft notifications to convert ESMA certifications.

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

Once the CRAR SI has come into force, the FCA intends to issue a direction for each of the above transitional processes, outlining the required content and format of the submission for it to be made in final form. The directions will be published on this page once made, alongside further information on how draft submissions can be made final. We may also publish drafts of the directions on this page ahead of that time.

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.

As noted above, once the CRAR SI has come into force, the FCA intends to issue a direction outlining the required content and format of these notifications, in order for them to be made in final form. At this stage, we have the intention of directing that final notifications will include the conversion form (with supporting documentation), and that the submission deadline will be in early March.

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.

As noted above, once the CRAR SI has come into force, the FCA intends to issue a direction outlining the required content and format of these notifications, in order for them to be made in final form. At this stage, we have the intention of directing that final notifications will include the conversion form (with supporting documentation), and that the submission deadline will be in early March.

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

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 29 March 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 29 March 2019. 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.

As noted above, once the CRAR SI has come into force, the FCA intends to issue a direction outlining the required content and format of these applications, in order for them to be made in final form. At this stage, we have the intention of directing that final applications will include the registration form (with supporting documentation). We are currently considering whether the direction will provide for further requirements.

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.

If you have any queries, please email us.