Date: 12 September 2016

On 13 July 2016, the European Securities and Markets Authority (ESMA) published a Consultation Paper  on guidelines on the validation and review of Credit Rating Agencies’ (CRAs) methodologies (the CP).

The purpose of the draft guidelines was to clarify ESMA’s expectations regarding how CRAs should validate and review their methodologies. ESMA aimed to achieve a consistent application of validation and review measures across CRAs through the demonstration of the discriminatory power, predictive power and historical robustness of their methodologies. The draft guidelines also identified the measures that CRAs should implement when validating and reviewing their methodologies with limited quantitative evidence.

The CP was accompanied by a Feedback Statement  which outlined the main issues that were highlighted in response to the Discussion Paper on these guidelines published in December 2015. The initial proposals were not substantially altered and the consultation focused on the changes that have been made in response to the feedback received.  

ESMA was seeking feedback from users of credit ratings and CRAs.

The consultation closed on 22 August 2016.