UK-registered credit rating agencies (CRAs) will be able to endorse credit ratings for regulatory use into the UK from affiliated EU CRAs.
We've confirmed that the European Union (EU) regulatory and supervisory framework for credit rating agencies (CRAs) meets the conditions for endorsement of credit ratings.
This allows UK-registered CRAs to endorse credit ratings into the UK from affiliated EU CRAs for regulatory use under the Credit Rating Agencies Regulation (CRAR), as amended by the Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019 (CRAR SI).
Under the CRAR SI, the FCA will be the UK regulator of CRAs. Once the new framework is in place, any legal person wishing to issue or endorse credit ratings for regulatory purposes, will need to be registered or certified with us. CRAs that operate in the UK after Brexit, will be able to endorse ratings from affiliated EU CRAs, subject to meeting all the relevant provisions in the Regulation. Find out which CRAs have registered or intend to register with us.
The endorsement of ratings from third-country affiliated CRAs, allows these ratings to be used by market participants for regulatory purposes. This includes when calculating capital requirements under the Capital Requirements Regulation and Solvency II.
Conditions for the endorsement of credit ratings
A condition for the endorsement of ratings from a third country into the UK is that the legal and supervisory framework of the third country meets a certain standard.
Following an assessment, we've concluded that the EU legal and supervisory framework meets the conditions for endorsement. However, the decision to endorse credit ratings issued by EU CRAs will lie exclusively with UK CRAs. UK CRAs must make sure they comply with all the requirements in Article 4(3) of CRAR, as amended by the CRAR SI.
The European Securities and Markets Authority (ESMA) has undertaken a similar exercise to assess the UK’s regulatory and supervisory framework. We welcome ESMA’s announcement (PDF) that it considers the UK’s framework to meet the conditions for endorsement.
Transition to the new framework
To ensure a smooth transition to the new framework, ratings issued or endorsed by an EU-based CRA that doesn't register with us, will still be available for regulatory use in the UK up to 1 year after exit. This excludes any new credit ratings, or credit ratings that undergo a subsequent rating change. This is set out in the CRAR SI and in our Transitional Direction exercising our Temporary Transitional Power.