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Regulation (EC) No 1060/2009 of the European Parliament and of the CouncilShow full title

Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (Text with EEA relevance)

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TITLE IU.K.SUBJECT MATTER, SCOPE AND DEFINITIONS

[F1Article 1U.K.Subject matter

This Regulation introduces a F2... regulatory approach in order to enhance the integrity, transparency, responsibility, good governance and independence of credit rating activities, contributing to the quality of credit ratings issued in the [F3United Kingdom] and to the smooth functioning of the F4... market, while achieving a high level of consumer and investor protection. It lays down conditions for the issuing of credit ratings and rules on the organisation and conduct of credit rating agencies, including their shareholders and members, to promote credit rating agencies’ independence, the avoidance of conflicts of interest, and the enhancement of consumer and investor protection.

[F5This Regulation also lays down obligations for issuers and related third parties established in the [F6United Kingdom] regarding securitisation instruments.]]

Textual Amendments

Article 2U.K.Scope

1.This Regulation applies to credit ratings issued by credit rating agencies registered in the [F7United Kingdom] and which are disclosed publicly or distributed by subscription.

2.This Regulation does not apply to:

(a)private credit ratings produced pursuant to an individual order and provided exclusively to the person who placed the order and which are not intended for public disclosure or distribution by subscription;

(b)credit scores, credit scoring systems or similar assessments related to obligations arising from consumer, commercial or industrial relationships;

(c)credit ratings produced by export credit agencies in accordance with [F8Article 114 and Article 137 of Regulation (EU) No 575/2013]; or

(d)credit ratings produced by [F9central banks] and which:

(i)

are not paid for by the rated entity;

(ii)

are not disclosed to the public;

(iii)

are issued in accordance with the principles, standards and procedures which ensure the adequate integrity and independence of credit rating activities as provided for by this Regulation; and

(iv)

do not relate to financial instruments issued by the [F10United Kingdom Government].

F113.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.In order to ensure the uniform application of paragraph 2(d), [F12the Treasury] may, F13... in accordance with paragraph 2(d) of this Article, adopt a decision stating that a central bank falls within the scope of that point and that its credit ratings are therefore exempt from the application of this Regulation.

[F12The Treasury] shall publish on its website the list of central banks falling within the scope of paragraph 2(d) of this Article.

Textual Amendments

Article 3U.K.Definitions

[F141.For the purpose of this Regulation:

  • ‘alternative investment fund manager’ has the meaning in regulation 4(1) of the Alternative Investment Managers Regulations 2013;

  • ‘beneficial owner’ has the meaning given to it in regulation 3(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017;

  • ‘central counterparty’ or ‘CCP’ means a legal person that interposes itself between the counterparties to the contracts traded on one or more financial markets, becoming the buyer to every seller and the seller to every buyer, which is authorised under the Financial Services and Markets Act 2000;

  • ‘common management relationship’, means a relationship between two or more undertakings which satisfies the following conditions:

    (i)

    the undertakings are not connected in the manner described in section 1162 of, and Schedule 7 to, the Companies Act 2006 (c. 46), and

    (ii)

    either:

    (a)

    the undertakings are managed on a unified basis pursuant to a contract with one of them, or provisions in the undertakings' memorandum or articles of association; or

    (b)

    the administrative, management or supervisory bodies of those undertakings consist, for the major part, of the same credit rating agencies in office during the financial year in respect of which it is being decided whether such a relationship exists;

  • ‘competent authority’, means the FCA;

  • ‘control’ means the relationship between a parent undertaking and a subsidiary, as described in section 1162(2) of the Companies Act 2006 (c. 46), or a close link between any natural or legal person and an undertaking;

  • ‘credit institution’ has the meaning given by Article 2.1.19 of the markets in financial instruments regulation;

  • ‘credit rating’ means an opinion regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, or of an issuer of such a debt or financial obligation, debt security, preferred share or other financial instrument, issued using an established and defined ranking system of rating categories;

  • ‘credit rating activities’ means data and information analysis and the evaluation, approval, issuing and review of credit ratings;

  • ‘credit rating agency’ means a legal person whose occupation includes the issuing of credit ratings on a professional basis;

  • ‘credit score’ means a measure of creditworthiness derived from summarising and expressing data based only on a pre-established statistical system or model, without any additional substantial rating-specific analytical input from a rating analyst;

  • ‘EU CRAR’ means Regulation (EC) 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies as it had effect in the European Union immediately before IP completion day;

  • ‘EU regulated market’ has the meaning given in Article 2.1.13.B of the markets in financial instruments regulation;

  • ‘the FCA’, means the Financial Conduct Authority;

  • ‘financial instrument’ has the meaning given by Article 2.1.9 of the markets in financial instruments regulation, read with Articles 5 to 8 of Commission Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive;

  • ‘group of credit rating agencies’ means a group of undertakings established in the United Kingdom consisting of a parent undertaking and its subsidiaries within the meaning of section 1162 of the Companies Act 2006 (c. 46) as well as undertakings linked to each other by a common management relationship and whose occupation includes the issuing of credit ratings. For the purposes of Article 4.3(a), a group of credit rating agencies shall also include credit rating agencies established in third countries;

  • ‘institution for occupational retirement provision’ means an institution, irrespective of its legal form, operating on a funded basis, established separately from any sponsoring undertaking or trade for the purpose of providing retirement benefits in the context of an occupational activity on the basis of an agreement or a contract agreed:

    (i)

    individually or collectively between the employer and the employee or their respective representatives, or

    (ii)

    with self-employed persons, in compliance with United Kingdom legislation,

    and which carries out activities directly arising therefrom;

  • ‘insurance undertaking’ has the meaning given in section 417 of the Financial Services and Markets Act 2000;

  • ‘investment firm’ has the meaning given by Article 2.1A of the markets in financial instruments regulation;

  • ‘investment research’ means research or other information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers of financial instruments, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public, and in relation to which the following conditions are met:

    (i)

    it is labelled or described as investment research or in similar terms, or is otherwise presented as an objective or independent explanation of the matters contained in the recommendation;

    (ii)

    if the recommendation in question were made by an investment firm to a client, it would not constitute the provision of investment advice (meaning the provision of credit rating agencies recommendations to a client, either upon its request or at the initiative of the investment firm, in respect of one or more transactions relating to financial instruments);

  • ‘issuer’ means a legal entity which issues or proposes to issue securities;

  • ‘lead rating analyst’ means a person with primary responsibility for elaborating a credit rating or for communicating with the issuer with respect to a particular credit rating or, generally, with respect to the credit rating of a financial instrument issued by that issuer and, where relevant, for preparing recommendations to the rating committee in relation to such rating;

  • ‘management company’ has the meaning given in section 237 of the Financial Services and Markets Act 2000 (c. 8);

  • ‘the markets in financial instruments regulation’ means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012;

  • ‘originator’ means either of the following:

    (i)

    an entity which, either itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised; or

    (ii)

    an entity which purchases a third party's exposure onto its balance sheet and then securitises them;

  • ‘prospectus’ means a prospectus published under Part 6 of the Financial Services and Markets Act 2000;

  • ‘rated entity’ means a legal person whose creditworthiness is explicitly or implicitly rated in the credit rating, whether or not it has solicited that credit rating and whether or not it has provided information for that credit rating;

  • ‘rating analyst’ means a person who performs analytical functions that are necessary for the issuing of a credit rating;

  • ‘rating category’ means a rating symbol, such as a letter or numerical symbol which might be accompanied by appending identifying characters, used in a credit rating to provide a relative measure of risk to distinguish the different risk characteristics of the types of rated entities, issuers and financial instruments or other assets;

  • ‘rating outlook’ means an opinion regarding the likely direction of a credit rating over the short term, the medium term or both;

  • ‘regulated market’ has the meaning given in Article 2.1(13) of the markets in financial instruments regulation;

  • ‘regulatory purposes’ means the use of credit ratings for the specific purpose of complying with the law applicable in the United Kingdom;

  • ‘reinsurance undertaking’ has the meaning given by section 417 of the Financial Services and Markets Act 2000;

  • ‘related third party’ means the originator, arranger, sponsor, servicer or any other party that interacts with a credit rating agency on behalf of a rated entity, including any person directly or indirectly linked to that rated entity by control;

  • ‘re-securitisation’ means a securitisation where the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation position;

  • ‘re-securitisation position’ means an exposure to a re-securitisation;

  • ‘senior management’ means the persons who effectively direct the business of the credit rating agency and the members of its administrative or supervisory board;

  • ‘sovereign rating’ means:

    (i)

    a credit rating where the entity rated is a State or a regional or local authority of a State;

    (ii)

    a credit rating where the issuer of the debt or financial obligation, debt security or other financial instrument is a State or a regional or local authority of a State, or a special purpose vehicle of a State or of a regional or local authority;

    (iii)

    a credit rating where the issuer is an international financial institution established by two or more States which has the purpose of mobilising funding and providing financial assistance for the benefit of the members of that international financial institution which are experiencing or threatened by severe financing problems;

  • ‘sponsor’ means a sponsor as defined in point (42) of Article 4 of Directive 2006/48/EC of the European Parliament and of the Council of 14th June 2006 relating to the taking up and pursuit of the business of credit institutions;

  • ‘sponsoring undertaking’ means any undertaking or other body, regardless of whether it includes or consists of one or more legal or natural credit rating agencies, which acts as an employer or in a self-employed capacity or any combination thereof and which pays contributions into an institution for occupational retirement provision;

  • [F15‘securitisation instrument’ means a financial instrument or other assets resulting from a securitisation transaction or scheme whereby the credit risk associated with an exposure or pool of exposures is tranched, having the following characteristics:

    (i)

    payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures;

    (ii)

    the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme; and

    (iii)

    the transaction or scheme does not create exposures which possess all of the characteristics listed in Article 147(8) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012;]

  • ‘third country’, means any country other than the United Kingdom;

  • ‘third country competent authorities’, means a public authority which is empowered under the law applicable in the relevant jurisdiction to supervise credit rating agencies;

  • ‘United Kingdom regulated market’ has the meaning given in Article 2.1(13A) of the markets in financial instruments regulation;

  • ‘unsolicited credit rating’ and ‘unsolicited sovereign rating’ mean, respectively, a credit rating or a sovereign rating assigned by a credit rating agency other than upon request.]

2.For the purposes of paragraph 1(a), the following shall not be considered to be credit ratings:

[F16(a)recommendations, meaning research or other information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers of financial instruments, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public;

(b)investment research and other forms of general recommendation, such as ‘buy’, ‘sell’ or ‘hold’, relating to transactions in financial instruments or to financial obligations; or]

(c)opinions about the value of a financial instrument or a financial obligation.

[F173.For the purposes of this Regulation, the term ‘shareholder’ includes beneficial owners, F18....]

Textual Amendments

Article 4U.K.Use of credit ratings

[F11.Credit institutions, investment firms, insurance undertakings, reinsurance undertakings, institutions for occupational retirement provision, management companies, investment companies, alternative investment fund managers and central counterparties may use credit ratings for regulatory purposes only if they are issued by credit rating agencies established in the [F19United Kingdom] and registered in accordance with this Regulation.

Where a prospectus contains a reference to a credit rating or credit ratings, the issuer, offeror, or person asking for admission to trading on a [F20United Kingdom regulated market] shall ensure that the prospectus also includes clear and prominent information stating whether or not such credit ratings are issued by a credit rating agency established in the [F19United Kingdom] and registered under this Regulation.]

[F211A.Without prejudice to the general effect of paragraph 37(1) of Schedule 8 to the EU Withdrawal Act 2018, credit institutions, investment firms, insurance undertakings, reinsurance undertakings, institutions for occupational retirement provision, management companies, investment companies, alternative investment fund managers and central counterparties may use, for the time period specified in paragraph 1B, a credit rating for regulatory purposes if:

(a)the rating is or was issued or endorsed by a credit rating agency established in the Union which is part of a group in respect of which one of its undertakings—

(i)is registered in the United Kingdom in accordance with this Regulation, or

(ii)has made an advance application under regulation 24 of the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019 to be registered in the United Kingdom in accordance with this Regulation, and

(b)the rating was issued or endorsed and not withdrawn immediately before IP completion day.

1B.The specified time period is one year beginning with IP completion day.]

2.A credit rating agency established in the [F19United Kingdom] and registered in accordance with this Regulation shall be deemed to have issued a credit rating when the credit rating has been published on the credit rating agency’s website or by other means or distributed by subscription and presented and disclosed in accordance with the obligations of Article 10, clearly identifying that the credit rating is endorsed in accordance with paragraph 3 of this Article.

3.A credit rating agency established in the [F19United Kingdom] and registered in accordance with this Regulation may endorse a credit rating issued in a third country only when credit rating activities resulting in the issuing of such a credit rating comply with the following conditions:

(a)the credit rating activities resulting in the issuing of the credit rating to be endorsed are undertaken in whole or in part by the endorsing credit rating agency or by credit rating agencies belonging to the same group;

[F1(b)the credit rating agency has verified and is able to demonstrate on an ongoing basis to [F22the FCA], that the conduct of the credit rating activities by the third-country credit rating agency resulting in the issuing of the credit rating to be endorsed fulfils requirements which are at least as stringent as the requirements set out in Articles 6 to 12 and Annex I, with the exception of Articles 6a, 6b, 8a, [F238b,] 8c and 11a, point (ba) of point 3 and points 3a and 3b of Section B of Annex I.]

[F24(c)the ability of [F25the FCA] to assess and monitor the compliance of the credit rating agency established in the third country with the requirements referred to in point (b) is not limited;

(d)the credit rating agency makes available on request to [F25the FCA] all the information necessary to enable [F25the FCA] to supervise on an ongoing basis the compliance with the requirements of this Regulation;]

(e)there is an objective reason for the credit rating to be elaborated in a third country;

(f)the credit rating agency established in the third country is authorised or registered, and is subject to supervision, in that third country;

(g)the regulatory regime in that third country prevents interference by the [F26third country competent authorities] and other public authorities of that third country with the content of credit ratings and methodologies; and

F27(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.A credit rating endorsed in accordance with paragraph 3 shall be considered to be a credit rating issued by a credit rating agency established in the [F19United Kingdom] and registered in accordance with this Regulation.

A credit rating agency established in the [F19United Kingdom] and registered in accordance with this Regulation shall not use such endorsement with the intention of avoiding the requirements of this Regulation.

5.The credit rating agency that has endorsed a credit rating issued in a third country in accordance with paragraph 3 shall remain fully responsible for such a credit rating and for the fulfilment of conditions set out therein.

[F286.The credit rating agency endorsing credit ratings issued in a third country is no longer required to verify or demonstrate that the condition laid down in paragraph 3(g) of this Article is fulfilled where—

(a)the legal and supervisory framework of that third country has been recognised as equivalent to the requirements of this Regulation by the Treasury in accordance with Article 5(6) and the cooperation arrangements referred to in Article 5(7) have been established by the FCA and are operational; or

(b)the legal and supervisory framework of that third country has been recognised as equivalent to the requirements of this Regulation by a decision adopted in accordance with Article 5(6) of EU CRAR before IP completion day that forms part of retained EU law.]

Textual Amendments

Article 5U.K.Equivalence and certification based on equivalence

1.The credit ratings that are related to entities established or financial instruments issued in third countries and that are issued by a credit rating agency established in a third country may be used in the [F29United Kingdom] under Article 4(1) without being endorsed in accordance with Article 4(3), provided that:

(a)the credit rating agency is authorised or registered in and is subject to supervision in that third country;

[F30(b)the legal and supervisory framework of that third country has been recognised as equivalent to the requirements of this Regulation—

(i)by the Treasury in accordance with paragraph 6 of this Article; or

(ii)by a decision adopted by the European Commission in accordance with Article 5(6) of EU CRAR before IP completion day that forms part of retained EU law;]

(c)[F31where point (b)(i) applies,] the cooperation arrangements referred to in paragraph 7 of this Article [F32have been established by the FCA in accordance with that paragraph and are operational];

(d)the credit ratings issued by the credit rating agency and its credit rating activities are not of systemic importance to the financial stability or integrity of the financial markets of [F33the United Kingdom]; and

(e)the credit rating agency is certified in accordance with paragraph 2 of this Article.

[F242.The credit rating agency referred to in paragraph 1 may apply for certification. The application shall be submitted to [F34the FCA] in accordance with the relevant provisions of Article 15.]

[F243.[F35The FCA] shall examine and decide on the application for certification in accordance with the procedure set out in Article 16. The certification decision shall be based on the criteria set out in points (a) to (d) of paragraph 1 of this Article.]

The certification decision shall be notified and published in accordance with Article 18.

[F244.The credit rating agency referred to in paragraph 1 may also apply to be exempted:

(a)on a case-by-case basis from complying with some or all of the requirements set out in Section A of Annex I and Article 7(4) if the credit rating agency is able to demonstrate that the requirements are not proportionate in view of the nature, scale and complexity of its business and the nature and range of its issuing of credit ratings;

(b)from the requirement of physical presence in the [F36United Kingdom] where such a requirement would be too burdensome and disproportionate in view of the nature, scale and complexity of its business and the nature and range of its issuing of credit ratings.

An application for an exemption under point (a) or (b) of the first subparagraph shall be submitted by the credit rating agency together with the application for certification. When assessing such an application, [F37the FCA] shall take into consideration the size of the credit rating agency referred to in paragraph 1, having regard to the nature, scale and complexity of its business and the nature and range of its issuing of credit ratings, as well as the impact of the credit ratings issued by the credit rating agency on the financial stability and integrity of the financial markets of [F38the United Kingdom]. On the basis of those considerations, [F37the FCA] may grant such exemption to the credit rating agency referred to in paragraph 1.]

F395.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.[F40The Treasury may specify by regulations] that the legal and supervisory framework of a third country ensures that credit rating agencies authorised or registered in that third country comply with legally binding requirements which are equivalent to the requirements resulting from this Regulation and which are subject to effective supervision and enforcement in that third country.

A third-country legal and supervisory framework may be considered equivalent to this Regulation if that framework fulfils at least the following conditions:

(a)credit rating agencies in that third country are subject to authorisation or registration and are subject to effective supervision and enforcement on an ongoing basis;

[F1(b)credit rating agencies in that third country are subject to legally binding rules which are equivalent to those set out in Articles 6 to 12 and Annex I, with the exception of Articles 6a, 6b, 8a, [F238b,] 8c and 11a, point (ba) of point 3 and points 3a and 3b of Section B of Annex I; and]

(c)the regulatory regime in that third country prevents interference by the supervisory authorities and other public authorities of that third country with the content of credit ratings and methodologies.

[F24In order to take account of developments on financial markets, [F41The Treasury may make regulations] to specify further or amend the criteria set out in points (a), (b) and (c) of the second subparagraph of this paragraph.]

[F247.[F42The FCA must take such steps as it considers appropriate to establish cooperation arrangements] with the relevant supervisory authorities of third countries whose legal and supervisory frameworks have been considered equivalent to this Regulation [F43by the Treasury in accordance with paragraph 6 of this Article or by a decision adopted by the European Commission in accordance with Article 5(6) of EU CRAR before IP completion day that forms part of retained EU law]. Such arrangements shall specify at least:

(a)the mechanism for the exchange of information between [F44the FCA] and the relevant supervisory authorities of the third countries concerned; and

(b)the procedures concerning the coordination of supervisory activities.]

[F18.Articles 20F45... and 24 shall apply to credit rating agencies certified in accordance with Article 5(3) and to credit ratings issued by them.]

Textual Amendments

[F17Article 5aU.K.Over-reliance on credit ratings by financial institutions

1.The entitites referred to in the first subparagraph of Article 4(1) shall make their own credit risk assessment and shall not solely or mechanistically rely on credit ratings for assessing the creditworthiness of an entity or financial instrument.

2.[F46The relevant competent authority] in charge of supervising the entities referred to in the first subparagraph of Article 4(1) shall, taking into account the nature, scale and complexity of their activities, monitor the adequacy of their credit risk assessment processes, assess the use of contractual references to credit ratings and, where appropriate, encourage them to mitigate the impact of such references, with a view to reducing sole and mechanistic reliance on credit ratings, in line with specific sectoral legislation.]

Textual Amendments

F47Article 5bU.K.Reliance on credit ratings by the European Supervisory Authorities and the European Systemic Risk Board

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

[F48Article 5cU.K.Over-reliance on credit ratings in Union law

Without prejudice to its right of initiative, the Treasury shall continue to review whether references to credit ratings in UK law trigger or have the potential to trigger sole or mechanistic reliance on credit ratings by the FCA, the entities referred to in the first subparagraph of Article 4(1) or other financial market participants.]

Textual Amendments

TITLE IIU.K.ISSUING OF CREDIT RATINGS

Article 6U.K.Independence and avoidance of conflicts of interest

[F11.A credit rating agency shall take all necessary steps to ensure that the issuing of a credit rating or a rating outlook is not affected by any existing or potential conflicts of interest or business relationship involving the credit rating agency issuing the credit rating or the rating outlook, its shareholders, managers, rating analysts, employees or any other natural person whose services are placed at the disposal or under the control of the credit rating agency, or any person directly or indirectly linked to it by control.]

2.In order to ensure compliance with paragraph 1, a credit rating agency shall comply with the requirements set out in Sections A and B of Annex I.

[F13.At the request of a credit rating agency, [F49the FCA] may exempt a credit rating agency from complying with the requirements of points 2, 5, 6 and 9 of Section A of Annex I and Article 7(4) if the credit rating agency is able to demonstrate that those requirements are not proportionate in view of the nature, scale and complexity of its business and the nature and range of issue of credit ratings and that:]

(a)the credit rating agency has fewer than 50 employees;

(b)the credit rating agency has implemented measures and procedures, in particular internal control mechanisms, reporting arrangements and measures ensuring independence of rating analysts and persons approving credit ratings, which ensure the effective compliance with the objectives of this Regulation; and

(c)the size of the credit rating agency is not determined in such a way as to avoid compliance with the requirements of this Regulation by a credit rating agency or a group of credit rating agencies.

[F24In the case of a group of credit rating agencies, [F49the FCA] shall ensure that at least one of the credit rating agencies in the group is not exempted from complying with the requirements of points 2, 5 and 6 of Section A of Annex I and Article 7(4).]

[F174.Credit rating agencies shall establish, maintain, enforce and document an effective internal control structure governing the implementation of policies and procedures to prevent and mitigate possible conflicts of interest and to ensure the independence of credit ratings, rating analysts and rating teams regarding shareholders, administrative and management bodies and sales and marketing activities. Credit rating agencies shall establish standard operating procedures (SOPs) with regard to corporate governance, organisation, and the management of conflicts of interest. They shall periodically monitor and review those SOPs in order to evaluate their effectiveness and assess whether they should be updated.]

Textual Amendments

[F17Article 6a U.K. Conflicts of interest concerning investments in credit rating agencies

1. A shareholder or a member of a credit rating agency holding at least 5 % of either the capital or the voting rights in that credit rating agency or in a company which has the power to exercise control or a dominant influence over that credit rating agency, shall be prohibited from:

(a) holding 5 % or more of the capital of any other credit rating agency;

(b) having the right or the power to exercise 5 % or more of the voting rights in any other credit rating agency;

(c) having the right or the power to appoint or remove members of the administrative or supervisory board of any other credit rating agency;

(d) being a member of the administrative or supervisory board of any other credit rating agency;

(e) exercising or having the power to exercise control or a dominant influence over any other credit rating agency.

The prohibition referred to in point (a) of the first subparagraph does not apply to holdings in diversified collective investment schemes, including managed funds such as pension funds or life insurance, provided that the holdings in such schemes do not put the shareholder or member of a credit rating agency in a position to exercise significant influence on the business activities of those schemes.

2. This Article does not apply to investments in other credit rating agencies belonging to the same group of credit rating agencies.

Textual Amendments

Article 6bU.K.Maximum duration of the contractual relationship with a credit rating agency

1.Where a credit rating agency enters into a contract for the issuing of credit ratings on re-securitisations, it shall not issue credit ratings on new re-securitisations with underlying assets from the same originator for a period exceeding four years.

2.Where a credit rating agency enters into a contract for rating re-securitisations, it shall request that the issuer:

(a)determine the number of credit rating agencies which have a contractual relationship for the issuing of credit ratings on re-securitisations with underlying assets from the same originator;

(b)calculate the percentage of the total number of outstanding rated re-securitisations with underlying assets from the same originator for which each credit rating agency issues credit ratings.

Where at least four credit rating agencies each rate more than 10 % of the total number of outstanding rated re-securitisations, the limitations set out in paragraph 1 shall not apply.

The exemption set out in the second subparagraph shall continue to apply at least until the credit rating agency enters into a new contract for rating re-securitisations with underlying assets from the same originator. Where the criteria set out in the second subparagraph are not met when entering into such a contract, the period referred to in paragraph 1 shall be calculated from the date on which the new contract was entered into.

3.As from the expiry of a contract pursuant to paragraph 1, a credit rating agency shall not enter into a new contract for the issuing of credit ratings on re-securitisations with underlying assets from the same originator for a period equal to the duration of the expired contract but not exceeding four years.

The first subparagraph shall also apply to:

(a)a credit rating agency belonging to the same group of credit rating agencies as the credit rating agency referred to in paragraph 1;

(b)a credit rating agency which is a shareholder or member of the credit rating agency referred to in paragraph 1;

(c)a credit rating agency in which the credit rating agency referred to in paragraph 1 is a shareholder or member.

4.Notwithstanding paragraph 1, where a credit rating of a re-securitisation is issued before the end of the maximum duration of the contractual relationship as referred to in paragraph 1, a credit rating agency may continue to monitor and update those credit ratings, on a solicited basis, for the duration of the re-securitisation.

5.This Article shall not apply to credit rating agencies that have fewer than 50 employees at group level involved in the provision of credit rating activities, or that have an annual turnover generated from credit rating activities of less than EUR 10 million at group level.

F506.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

Article 7U.K.Rating analysts, employees and other persons involved in the issuing of credit ratings

1.A credit rating agency shall ensure that rating analysts, its employees and any other natural person whose services are placed at its disposal or under its control and who are directly involved in credit rating activities have appropriate knowledge and experience for the duties assigned.

2.A credit rating agency shall ensure that persons referred to in paragraph 1 shall not be allowed to initiate or participate in negotiations regarding fees or payments with any rated entity, related third party or any person directly or indirectly linked to the rated entity by control.

3.A credit rating agency shall ensure that persons referred to in paragraph 1 meet the requirements set out in Section C of Annex I.

4.A credit rating agency shall establish an appropriate gradual rotation mechanism with regard to the rating analysts and persons approving credit ratings as defined in Section C of Annex I. That rotation mechanism shall be undertaken in phases on the basis of individuals rather than of a complete team.

[F15. Compensation and performance evaluation of employees involved in the credit rating activities or rating outlooks, as well as persons approving the credit ratings or rating outlooks, shall not be contingent on the amount of revenue that the credit rating agency derives from the rated entities or related third parties.]

Textual Amendments

Article 8U.K.Methodologies, models and key rating assumptions

1.A credit rating agency shall disclose to the public the methodologies, models and key rating assumptions it uses in its credit rating activities as defined in point 5 of Part I of Section E of Annex I.

[F12.A credit rating agency shall adopt, implement and enforce adequate measures to ensure that the credit ratings and the rating outlooks it issues are based on a thorough analysis of all the information that is available to it and that is relevant to its analysis according to the applicable rating methodologies. It shall adopt all necessary measures so that the information it uses in assigning credit ratings and rating outlooks is of sufficient quality and from reliable sources. The credit rating agency shall issue credit ratings and rating outlooks stipulating that the rating is the agency’s opinion and should be relied upon to a limited degree.

2a.Changes in credit ratings shall be issued in accordance with the credit rating agency’s published rating methodologies.]

3.A credit rating agency shall use rating methodologies that are rigorous, systematic, continuous and subject to validation based on historical experience, including back-testing.

4.Where a credit rating agency is using an existing credit rating prepared by another credit rating agency with respect to underlying assets or [F5securitisation instruments], it shall not refuse to issue a credit rating of an entity or a financial instrument because a portion of the entity or the financial instrument had been previously rated by another credit rating agency.

A credit rating agency shall record all instances where in its credit rating process it departs from existing credit ratings prepared by another credit rating agency with respect to underlying assets or [F5securitisation instruments] providing a justification for the differing assessment.

5.A credit rating agency shall monitor credit ratings and review its credit ratings and methodologies on an ongoing basis and at least annually, in particular where material changes occur that could have an impact on a credit rating. A credit rating agency shall establish internal arrangements to monitor the impact of changes in macroeconomic or financial market conditions on credit ratings.

[F17Sovereign ratings shall be reviewed at least every six months.]

[F175a.A credit rating agency that intends to make a material change to, or use, new rating methodologies, models or key rating assumptions which could have an impact on a credit rating shall publish the proposed material changes or proposed new rating methodologies on its website inviting stakeholders to submit comments for a period of one month together with a detailed explanation of the reasons for and the implications of the proposed material changes or proposed new rating methodologies.]

[F16.Where rating methodologies, models or key rating assumptions used in credit rating activities are changed in accordance with Article 14(3), a credit rating agency shall:]

(a)immediately, using the same means of communication as used for the distribution of the affected credit ratings, disclose the likely scope of credit ratings to be affected;

[F17(aa)immediately inform [F51the FCA] and publish on its website the results of the consultation and the new rating methodologies together with a detailed explanation thereof and their date of application;

(ab)immediately publish on its website the responses to the consultation referred to in paragraph 5a except in cases where confidentiality is requested by the respondent to the consultation;]

(b)review the affected credit ratings as soon as possible and no later than six months after the change, in the meantime placing those ratings under observation; and

(c)re-rate all credit ratings that have been based on those methodologies, models or key rating assumptions if, following the review, the overall combined effect of the changes affects those credit ratings.

[F177.Where a credit rating agency becomes aware of errors in its rating methodologies or in their application it shall immediately:

(a)notify those errors to [F52the FCA] and all affected rated entities explaining the impact on its ratings including the need to review issued ratings;

(b)where errors have an impact on its credit ratings, publish those errors on its website;

(c)correct those errors in the rating methodologies; and

(d)apply the measures referred to in points (a), (b) and (c) of paragraph 6.]

Textual Amendments

[F17Article 8aU.K.Sovereign ratings

1.Sovereign ratings shall be issued in a manner which ensures that the individual specificity of a particular [F53country] has been analysed. A statement announcing revision of a given group of countries shall be prohibited if it is not accompanied by individual country reports. Such reports shall be made publicly available.

2.Public communications other than credit ratings, rating outlooks, or accompanying press releases or reports as referred to in point 5 of Part I of Section D of Annex I, which relate to potential changes in sovereign ratings shall not be based on information within the sphere of the rated entity that has been disclosed without the consent of the rated entity, unless it is available from generally accessible sources or unless there are no legitimate reasons for the rated entity not to give its consent to the disclosure of the information.

3.A credit rating agency shall, taking into consideration the second subparagraph of Article 8(5), publish on its website and submit to [F54the FCA] on an annual basis, in accordance with point 3 of Part III of Section D of Annex I, a calendar at the end of December for the following 12 months, setting a maximum of three dates for the publication of unsolicited sovereign ratings and related rating outlooks and setting the dates for the publication of solicited sovereign ratings and related rating outlooks. Such dates shall be set on a Friday.

4.Deviation of the publication of sovereign ratings or related rating outlooks from the calendar shall only be possible where necessary for the credit rating agency to comply with its obligations under Article 8(2), Article 10(1) and Article 11(1) and shall be accompanied by a detailed explanation of the reasons for the deviation from the announced calendar.

Textual Amendments

F23Article 8bU.K. [F23Information on structured finance instruments]

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Textual Amendments

Article 8c U.K. Double credit rating of [F5securitisation instruments]

1. Where an issuer or a related third party intends to solicit a credit rating of a [F5securitisation instrument] , it shall appoint at least two credit rating agencies to provide credit ratings independently of each other.

2. The issuer or a related third party as referred to in paragraph 1 shall ensure that the appointed credit rating agencies comply with the following conditions:

(a) they do not belong to the same group of credit rating agencies;

(b) they are not a shareholder or a member of any of the other credit rating agencies;

(c) they do not have the right or the power to exercise voting rights in any of the other credit rating agencies;

(d) they do not have the right or the power to appoint or remove members of the administrative or supervisory board of any of the other credit rating agencies;

(e) none of the members of their administrative or supervisory boards are a member of the administrative or supervisory boards of any of the other credit rating agencies;

(f) they do not exercise, or have the power to exercise, control or a dominant influence over any of the other credit rating agencies.

Textual Amendments

Article 8dU.K.Use of multiple credit rating agencies

1.Where an issuer or a related third party intends to appoint at least two credit rating agencies for the credit rating of the same issuance or entity, the issuer or a related third party shall consider appointing at least one credit rating agency with no more than 10 % of the total market share, which can be evaluated by the issuer or a related third party as capable of rating the relevant issuance or entity, provided that, based on [F55the FCA]’s list referred to in paragraph 2, there is a credit rating agency available for rating the specific issuance or entity. Where the issuer or a related third party does not appoint at least one credit rating agency with no more than 10 % of the total market share, this shall be documented.

2.With a view to facilitating the evaluation by the issuer or a related third party under paragraph 1, [F55the FCA] shall annually publish on its website a list of registered credit rating agencies, indicating their total market share and the types of credit ratings issued, which can be used by the issuer as a starting point for its evaluation.

3.For the purposes of this Article, total market share shall be measured with reference to annual turnover generated from credit rating activities and ancillary services, at group level.]

Textual Amendments

[F24Article 9U.K.Outsourcing

Outsourcing of important operational functions shall not be undertaken in such a way as to impair materially the quality of the credit rating agency's internal control and the ability of [F56the FCA] to supervise the credit rating agency's compliance with obligations under this Regulation.]

Textual Amendments

Article 10U.K.Disclosure and presentation of credit ratings

[F11.A credit rating agency shall disclose any credit rating or rating outlook, as well as any decision to discontinue a credit rating, on a non-selective basis and in a timely manner. In the event of a decision to discontinue a credit rating, the information disclosed shall include full reasons for the decision.

The first subparagraph shall also apply to credit ratings that are distributed by subscription.

2.Credit rating agencies shall ensure that credit ratings and rating outlooks are presented and processed in accordance with the requirements set out in Section D of Annex I and shall not present factors other than those related to the credit ratings.

2a.Until disclosure to the public of credit ratings, rating outlooks and information relating thereto, they shall be deemed to be inside information as defined in, and in accordance with, [F57Regulation (EU) No 596/2014].

[F58Regulation (EU) No 596/2014] shall apply mutatis mutandis to credit rating agencies as regards their duty of confidentiality and their obligation to maintain a list of persons who have access to their credit ratings, rating outlooks or related information before disclosure.

The list of persons to whom credit ratings, rating outlooks and information relating thereto are communicated before being disclosed shall be limited to persons identified by each rated entity for that purpose.]

3.When a credit rating agency issues credit ratings for [F5securitisation instruments, it shall ensure that rating categories that are attributed to securitisation instruments] are clearly differentiated using an additional symbol which distinguishes them from rating categories used for any other entities, financial instruments or financial obligations.

4.A credit rating agency shall disclose its policies and procedures regarding unsolicited credit ratings.

[F15.Where a credit rating agency issues an unsolicited credit rating, it shall state prominently in the credit rating, using a clearly distinguishable different colour code for the rating category, whether or not the rated entity or a related third party participated in the credit rating process and whether the credit rating agency had access to the accounts, management and other relevant internal documents for the rated entity or a related third party.]

Unsolicited credit ratings shall be identified as such.

[F246.A credit rating agency shall not use the name of [F59the FCA] in such a way that would indicate or suggest endorsement or approval by [F59the FCA] of the credit ratings or any credit rating activities of the credit rating agency.]

Textual Amendments

Article 11U.K.General and periodic disclosures

1.A credit rating agency shall fully disclose to the public and update immediately information relating to the matters set out in Part I of Section E of Annex I.

[F12.A registered or certified credit rating agency shall make available in a central repository established by [F60the FCA] information on its historical performance data, including the ratings transition frequency, and information about credit ratings issued in the past and on their changes. Such a credit rating agency shall provide information to that repository on a standard form as provided for by [F60the FCA]. [F61The FCA] shall make that information accessible to the public and shall publish summary information on the main developments observed on an annual basis.]

[F243.A credit rating agency shall provide annually, by 31 March, to ESMA information relating to matters set out in point 2 of Part II of Section E of Annex I.]

Textual Amendments

[F17Article 11aU.K.[F62Public rating database]

1.A registered or certified credit rating agency shall, when issuing a credit rating or a rating outlook, submit to [F63the FCA] rating information, including the credit rating and rating outlook of the rated instrument, information on the type of credit rating, the type of rating action, and date and hour of publication.

2.[F64The FCA] shall publish the individual credit ratings submitted to it pursuant to paragraph 1 on a website F65....

F66...

3.This Article shall not apply to credit ratings or rating outlooks which are exclusively produced for and disclosed to investors for a fee.]

Textual Amendments

Article 12U.K.Transparency report

A credit rating agency shall publish annually a transparency report which includes information on matters set out in Part III of Section E of Annex I. The credit rating agency shall publish its transparency report at the latest three months after the end of each financial year and shall ensure that it remains available on the website of the agency for at least five years.

Article 13U.K.Public disclosure fees

A credit rating agency shall not charge a fee for the information provided in accordance with Articles 8 to 12.

TITLE IIIU.K.SURVEILLANCE OF CREDIT RATING ACTIVITIES

CHAPTER IU.K.Registration procedure

Article 14U.K.Requirement for registration

1.A credit rating agency shall apply for registration for the purposes of Article 2(1) provided that it is a legal person established in the [F67United Kingdom].

[F242.The registration shall be effective F68... once the decision to register a credit rating agency adopted by [F69the FCA] as referred to in Article 16(3) or Article 17(3) has taken effect.]

3.A registered credit rating agency shall comply at all times with the conditions for initial registration.

[F24A credit rating agency shall, without undue delay, notify [F70the FCA] of any material changes to the conditions for initial registration, including any opening or closing of a branch within the [F71United Kingdom].]

[F17Without prejudice to the second subparagraph, the credit rating agency shall notify [F70the FCA] of the intended material changes to the rating methodologies, models or key rating assumptions or the proposed new rating methodologies, models or key rating assumptions when the credit rating agency publishes the proposed changes or proposed new rating methodologies on its website in accordance with Article 8(5a). After the expiry of the consultation period, the credit rating agency shall notify [F70the FCA] of any changes due to the consultation.]

[F244.Without prejudice to Article 16 or 17, [F72the FCA] shall register the credit rating agency if it concludes from the examination of the application that the credit rating agency complies with the conditions for the issuing of credit ratings set out in this Regulation, taking into consideration Articles 4 and 6.

5.[F73The FCA] shall not impose requirements regarding registration which are not provided for in this Regulation.]

Textual Amendments

[F24Article 15U.K.Application for registration

1.The credit rating agency shall submit an application for registration to [F74the FCA]. The application shall contain information on the matters set out in Annex II.

2.Where a group of credit rating agencies applies for registration, the members of the group shall mandate one of their number to submit all the applications to [F75the FCA] on behalf of the group. The mandated credit rating agency shall provide the information on the matters set out in Annex II for each member of the group.

3.A credit rating agency shall submit its application in [F76English]. F77...

4.Within 20 working days of receipt of the application, [F78the FCA] shall assess whether the application is complete. If the application is not complete, [F78the FCA] shall set a deadline by which the credit rating agency is to provide additional information.

After assessing an application as complete, [F78the FCA] shall notify the credit rating agency accordingly.

Textual Amendments

Article 16U.K.Examination of the application for registration of a credit rating agency by [F79the FCA]

1.[F80The FCA] shall, within 45 working days of the notification referred to in the second subparagraph of Article 15(4), examine the application for registration of a credit rating agency based on the compliance of the credit rating agency with the conditions set out in this Regulation.

2.[F81The FCA] may extend the period of examination by 15 working days, in particular if the credit rating agency:

(a)envisages endorsing credit ratings as referred to in Article 4(3);

(b)envisages using outsourcing; or

(c)requests exemption from compliance in accordance with Article 6(3).

3.Within 45 working days of the notification referred to in the second subparagraph of Article 15(4), or within 60 working days thereof where paragraph 2 of this Article applies, [F82the FCA] shall adopt a fully reasoned decision to register or refuse registration.

4.The decision adopted by [F82the FCA] pursuant to paragraph 3 shall take effect on the fifth working day following its adoption.

Textual Amendments

Article 17U.K.Examination of the applications for registration of a group of credit rating agencies by [F83the FCA]

1.[F84The FCA] shall, within 55 working days of the notification referred to in the second subparagraph of Article 15(4), examine the applications for registration of a group of credit rating agencies based on the compliance of those credit rating agencies with the conditions set out in this Regulation.

2.[F85The FCA] may extend the period of examination by 15 working days, in particular if any of the credit rating agencies in the group:

(a)envisages endorsing credit ratings as referred to in Article 4(3);

(b)envisages using outsourcing; or

(c)requests exemption from compliance in accordance with Article 6(3).

3.Within 55 working days of the notification as referred to in the second subparagraph of Article 15(4), or within 70 working days thereof where paragraph 2 of this Article applies, [F86the FCA] shall adopt a fully reasoned individual decision to register or refuse registration for each credit rating agency of the group.

4.The decision adopted by [F87the FCA] pursuant to paragraph 3 shall take effect on the fifth working day following its adoption.

Textual Amendments

[F88Article 18U.K.Notification of decisions

1.Within 5 working days of the adoption of a decision under Article 16, 17, 20 or 24, the FCA must notify its decision to the credit rating agency concerned.

2.If the decision referred to in paragraph 1 is:

(a)to refuse the application for registration made under Article 16 or 17,

(b)to exercise the FCA's power under Article 20(1) or 20(2) to withdraw the registration of the credit rating agency on the FCA's own initiative,

(c)to refuse an application made by a credit rating agency under Article 20(3) to withdraw the registration of the credit rating agency, or

(d)to give a direction under Article 24(1),

the FCA must give the credit rating agency a written notice.

3.A written notice under paragraph 2 must:

(a)give details of the decision made by the FCA,

(b)state the FCA's reasons for the decision,

(c)state when the decision takes effect, and

(d)inform the credit rating agency that it may either:

(i)request a review of the decision by the FCA, and make written representations for the purpose of the review, within such period as may be specified in the notice, or

(ii)refer the matter to the Upper Tribunal within such period as may be specified in the notice, and

(e)indicate the procedure on a reference to the Upper Tribunal.

4.Subject to paragraph 5, a withdrawal of registration under Article 20, or a direction under Article 24(1), takes effect:

(a)immediately, upon the adoption of the decision, if the notice states that is the case,

(b)on such date as may be specified in that notice, or

(c)if no date is specified in the notice, when the matter to which the notice relates is no longer open to review.

5.In respect of a decision to withdraw registration under Article 20, a notice that a decision is to take effect immediately is subject to the transitional period for the use of credit ratings for regulatory purposes under Article 24(3).

6.A decision to withdraw registration on the FCA's own initiative under Article 20(1) or (2), or to give a direction under Article 24(1), may be expressed to take effect immediately (or on a specified date) only if the FCA, having regard to the ground on which it is exercising its power reasonably considers that it is necessary for the withdrawal or direction to take effect immediately (or on that date).

7.A refusal of an application to register under Article 16 or 17 comes into effect on the fifth working day following its adoption.

8.If the credit rating agency requests a review of the decision made by the FCA (“the original decision”) the FCA must consider any written representations made by the credit rating agency and review the original decision.

9.On a review under paragraph 8 the FCA may make any decision (“the new decision”) it could have made on the application.

10.The FCA must give the credit rating agency written notice of its new decision, if the new decision is:

(a)to maintain a decision to refuse an application for registration, made under Article 16 or 17,

(b)to refuse to revoke a decision made under Article 20(1) or 20(2) to withdraw the registration of the credit rating agency on the FCA's own initiative,

(c)to maintain a decision to refuse an application from a credit rating agency under Article 20(3) to withdraw the registration of the credit rating agency,

(d)to refuse to revoke a direction given under Article 24(1), or

(e)to impose a different direction to that given in the original decision under Article 24(1).

12.The written notice under paragraph 10 must:

(a)give details of the new decision made by the FCA;

(b)state the FCA's reasons for the new decision;

(c)state whether the decision takes effect immediately or on such date as may be specified in the notice;

(d)inform the credit rating agency that it may, within such period as may be specified in the notice, refer the new decision to the Upper Tribunal; and

(e)indicate the procedure on a reference to the Upper Tribunal.]

Textual Amendments

[F89Article 18AU.K.Upper Tribunal

1.Subject to paragraph 2, a credit rating agency may refer to the Upper Tribunal the FCA's decision to:

(a)refuse to register the credit rating agency under Article 16 or 17,

(b)exercise its power under Article 20(1) or 20(2) to withdraw the registration of a credit rating agency,

(c)refuse the credit rating agency's application under Article 20(3) to withdraw its registration, or

(d)give a direction under Article 24(1).

2.Where there is a review under Article 18(7), paragraph 1 applies in relation to the new decision only.]

Textual Amendments

F90Article 19U.K.Registration and supervisory fees

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Textual Amendments

[F91Article 20U.K.Withdrawal of registration

1.Without prejudice to Article 24, the FCA may on its own initiative withdraw the registration of a credit rating agency where the credit rating agency:

(a)expressly renounces the registration or has provided no credit ratings for the preceding 6 months,

(b)obtained the registration by making false statements or by any other irregular means, or

(c)no longer meets the conditions under which it was registered.

2.The FCA may also, on its own initiative, withdraw the registration of a credit rating agency where it is desirable to do so to advance one or more of its operational objectives as set out in section 1B(3) of the Financial Services and Markets Act 2000.

3.The FCA may, on an application by a credit rating agency, withdraw the registration of the credit rating agency.

4.The decision on the withdrawal of registration of a credit rating agency under paragraph 1, 2 or 3 shall be reflected in the Register and shall take immediate effect in the United Kingdom, subject to the transitional period for the use of credit ratings referred to in Article 24(3).]

Textual Amendments

CHAPTER IIU.K. Supervision by [F92the FCA]

Article 21U.K.[F93The FCA]

1.Without prejudice to Article 25a, [F94the FCA] shall ensure that this Regulation is applied.

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[F14.[F97The FCA may adopt] technical standards to specify:]

(a)the information to be provided by a credit rating agency in its application for registration as set out in Annex II;

(b)information that the credit rating agency must provide for the application for certification and for the assessment of its systemic importance to the financial stability or integrity of financial markets referred to in Article 5;

(c)the presentation of the information, including structure, format, method and period of reporting, that credit rating agencies shall disclose in accordance with Article 11(2) and point 1 of Part II of Section E of Annex I;

(d)the assessment of compliance of credit rating methodologies with the requirements set out in Article 8(3);

[F1(e)the content and format of ratings data periodic reporting to be requested from registered and certified credit rating agencies for the purpose of ongoing supervision by [F98the FCA].]

F99...

[F174a.[F100The FCA may adopt] technical standards to specify:

(a)the content and the presentation of the information, including structure, format, method and timing of reporting that credit rating agencies are to disclose to [F101the FCA] in accordance with Article 11a(1); and

(b)the content and format of periodic reporting on fees charged by credit rating agencies for the purpose of ongoing supervision by [F101the FCA].

F102...

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[F15.[F104The FCA] shall publish an annual report on the application of this Regulation. That report shall contain, in particular, an assessment of the implementation of Annex I by the credit rating agencies registered under this Regulation and an assessment of the application of the endorsement mechanism referred to in Article 4(3).]

6.[F105The FCA] shall present annually to [F106the Treasury] a report on supervisory measures taken and penalties imposed by [F107the FCA] under this Regulation, including fines and periodic penalty payments.

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Textual Amendments

F109Article 22U.K.Competent authorities

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Textual Amendments

[F110Article 22aU.K.[F1Examination of compliance with methodology requirements]

1.In the exercise of its ongoing supervision of credit rating agencies registered under this Regulation, [F111the FCA] shall examine regularly compliance with Article 8(3).

2.Without prejudice to Article 23, [F111the FCA] shall also in the framework of the examination referred to in paragraph 1:

(a)verify the execution of back-testing by credit rating agencies;

(b)analyse the results of that back-testing; and

(c)verify that the credit rating agencies have processes in place to take into account the results of the back-testing in their rating methodologies.]

Textual Amendments

[F24Article 23U.K.Non-interference with content of ratings or methodologies

In carrying out their duties under this Regulation, [F112the FCA, any public authorities of the United Kingdom or the Treasury] shall not interfere with the content of credit ratings or methodologies.

Textual Amendments

F113Article 23aU.K. Exercise of the powers referred to in Articles 23b to 23d

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Textual Amendments

F113Article 23bU.K. Requests for information

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Textual Amendments

F113Article 23cU.K. General investigations

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Textual Amendments

F113Article 23dU.K. On-site inspections

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Textual Amendments

F113Article 23eU.K. Procedural rules for taking supervisory measures and imposing fines

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Textual Amendments

[F114Article 24U.K.Supervisory measures

1.Where it appears to the FCA that a credit rating agency has failed, or is likely to fail, to comply with any of the obligations imposed on it by or under this Regulation or under the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019, the FCA may make one or more of the following directions:

(a)that the credit rating agency is temporarily prohibited from issuing credit ratings with effect throughout the United Kingdom;

(b)that the use, for regulatory purposes, of credit ratings issued by the credit rating agency are suspended with effect throughout the United Kingdom.

2.When considering whether to impose a direction under paragraph 1, the FCA shall take into account the nature and seriousness of the failure or likely failure.

3.Credit ratings may continue to be used for regulatory purposes following the publication of a direction under paragraph 1(b) or a decision under Article 20(3) during a period not exceeding—

(a)ten working days from the date the FCA's direction is made if there are credit ratings of the same financial instrument or entity issued by other credit rating agencies registered under this Regulation;

(b)three months from the date the FCA's direction is made if there are no credit ratings of the same financial instrument or entity issued by other credit rating agencies registered under this Regulation.]

Textual Amendments

F115Article 25U.K. Hearing of the persons concerned

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Textual Amendments

F116Article 25aU.K.Sectoral competent authorities responsible for the supervision and enforcement of Article 4(1) and Articles 5a, 8b, 8c and 8d

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Textual Amendments

Textual Amendments

CHAPTER IIIU.K.[F117Professional secrecy]]

F118Article 26U.K.Obligation to cooperate

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Textual Amendments

F118Article 27U.K. Exchange of information

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Textual Amendments

F39Article 28U.K. [F39Cooperation in case of a request with regard to on-site inspections or investigations

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Textual Amendments

F39Article 29U.K. Colleges of competent authorities]

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Textual Amendments

F119Article 30U.K.Delegation of tasks by ESMA to competent authorities

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Textual Amendments

F119Article 31U.K. Notifications and suspension requests by competent authorities

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Textual Amendments

F120Article 32U.K.Professional secrecy

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Textual Amendments

F39Article 33U.K. [F39Disclosure of information from another Member State]

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Textual Amendments

Textual Amendments

CHAPTER IVU.K.Cooperation with third countries

[F24Article 34U.K.Agreement on exchange of information

[F121The FCA] may conclude cooperation agreements on exchange of information with the supervisory authorities of third countries only if the information disclosed is subject to [F122conditions for the protection of confidential information that are, at least, equivalent to those under the Financial Services and Markets Act 2000].

Such exchange of information shall be intended for the performance of the tasks of [F123the FCA] or those supervisory authorities.

[F124Nothing in this Regulation is to be taken as authorising a disclosure of personal data in contravention of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data or of the Data Protection Act 2018.]

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Article 35U.K.Disclosure of information from third countries

[F125The FCA] may disclose the information received from supervisory authorities of third countries only if [F126the FCA] F127... has obtained the express agreement of the supervisory authority that has transmitted the information and, where applicable, the information is disclosed only for the purposes for which that supervisory authority gave its agreement or where such disclosure is necessary for legal proceedings.]

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[F17TITLE IIIA U.K. CIVIL LIABILITY OF CREDIT RATING AGENCIES

Article 35aU.K.Civil liability

1.Where a credit rating agency has committed, intentionally or with gross negligence, any of the infringements listed in Annex III having an impact on a credit rating, an investor or issuer may claim damages from that credit rating agency for damage caused to it due to that infringement.

An investor may claim damages under this Article where it establishes that it has reasonably relied, in accordance with Article 5a(1) or otherwise with due care, on a credit rating for a decision to invest into, hold onto or divest from a financial instrument covered by that credit rating.

An issuer may claim damages under this Article where it establishes that it or its financial instruments are covered by that credit rating and the infringement was not caused by misleading and inaccurate information provided by the issuer to the credit rating agency, directly or through information publicly available.

2.It shall be the responsibility of the investor or issuer to present accurate and detailed information indicating that the credit rating agency has committed an infringement of this Regulation, and that that infringement had an impact on the credit rating issued.

What constitutes accurate and detailed information shall be assessed by the F128... court, taking into consideration that the investor or issuer may not have access to information which is purely within the sphere of the credit rating agency.

3.The civil liability of credit rating agencies, as referred to in paragraph 1, shall only be limited in advance where that limitation is:

(a)reasonable and proportionate; and

(b)allowed by the [F129law applicable in the United Kingdom] in accordance with paragraph 4.

Any limitation that does not comply with the first subparagraph, or any exclusion of civil liability shall be deprived of any legal effect.

4.Terms such as ‘damage’, ‘intention’, ‘gross negligence’, ‘reasonably relied’, ‘due care’, ‘impact’, ‘reasonable’ and ‘proportionate’ which are referred to in this Article but are not defined, shall be interpreted and applied in accordance with the [F130law applicable in the United Kingdom] as determined by the relevant rules of private international law. Matters concerning the civil liability of a credit rating agency which are not covered by this Regulation shall be governed by the [F130law applicable in the United Kingdom] as determined by the relevant rules of private international law. F131...

5.This Article does not exclude further civil liability claims in accordance with [F132law applicable in the United Kingdom].

6.The right of redress set out in this Article shall not prevent [F133the FCA] from fully performing its powers [F134to impose fines under the Credit Rating Agencies (EU Exit) (Amendments etc.) Regulations 2019 or under this Regulation].]

Textual Amendments

TITLE IVU.K.[F135Amendment to Annexes]

CHAPTER IU.K.[F24Penalties, fines, periodic penalty payments, committee procedure, delegated powers and reporting]

F136Article 36U.K.Penalties

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F136Article 36aU.K.Fines

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F136Article 36bU.K. Periodic penalty payments

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F136Article 36cU.K. Hearing of the persons subject to the proceedings

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Textual Amendments

F136Article 36dU.K. Disclosure, nature, enforcement and allocation of fines and periodic penalty payments

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Textual Amendments

F136Article 36eU.K. Review by the Court of Justice of the European Union

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Textual Amendments

[F24Article 37U.K.Amendments to Annexes

In order to take account of developments, including international developments, on financial markets, in particular in relation to new financial instruments, [F137the Treasury may amend Annexes I and II by regulations].]

Textual Amendments

[F138Article 38U.K.Treasury Regulations

1.Any power to make regulations conferred on the Treasury by this Regulation is exercisable by statutory instrument.

2.Such regulations may—

(a)make incidental, supplemental, consequential or transitional provision;

(b)make different provision for different purposes; and

(c)amend or revoke any decision to which Article 5(1)(b)(ii) refers.

3.Unless paragraph 4 applies, a statutory instrument containing regulations made under this Regulation is subject to annulment in pursuance of a resolution of either House of Parliament.

4.A statutory instrument containing regulations made in exercise of the power in subparagraph 3 of Article 5(6) may not be made unless a draft of the instrument has been laid before Parliament and approved by a resolution of each House.]

Textual Amendments

F139Article 38aU.K.Exercise of the delegation

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Textual Amendments

F139Article 38bU.K. Revocation of the delegation

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Textual Amendments

F139Article 38cU.K. Objections to delegated acts

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Textual Amendments

F139Article 39U.K.Reports

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F139Article 39aU.K.ESMA’s staffing and resources

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Textual Amendments

F139Article 39bU.K.Reporting obligations

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CHAPTER IIU.K.Transitional and final provisions

F139Article 40U.K.Transitional provision

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Textual Amendments

F139Article 40aU.K. Transitional measures related to ESMA

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F139Article 41U.K.Entry into force

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Textual Amendments

F140...

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