EU Positive Assessment of UK Post-Brexit Regime Paves Way for Endorsement of UK Credit Ratings

The European Securities and Markets Authority has published a further statement on the implications of a no-deal Brexit for U.K. credit rating agencies. The CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may use credit ratings only for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. U.K. CRAs will lose their EU registration when the U.K. leaves the EU on a "hard Brexit."

ESMA states that following its statement in November 2018, U.K. CRAs have taken steps to mitigate the effects of a no-deal Brexit by either transferring relevant business to their EU group entities or establishing EU entities. However, further action is needed.

ESMA confirms that it has assessed the U.K.'s post-Brexit regime for CRAs and considers that it meets the conditions for endorsement. In addition, the U.K. Financial Conduct Authority and ESMA have entered into cooperation arrangements, which satisfy a further condition for endorsement. Noting that the EU CRA Regulation only allows endorsement when there is an objective reason for elaborating the credit rating outside of the EU, ESMA confirms that any endorsement is the final decision of an EU CRA.

The U.K. Financial Conduct Authority has announced today that the EU regime has been positively assessed for endorsement under the U.K.'s CRA Regulation, which will allow EU credit ratings to be endorsed by U.K.-registered CRAs after Brexit.

View ESMA's updated statement on the implications of a no-deal Brexit for U.K. credit ratings.

View details of ESMA's original statement on the implications of a no-deal Brexit for U.K. credit ratings.

View details of the FCA's statement on endorsement of EU credit ratings.

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