http://www.legislation.gov.uk/eur/2012/449/chapter/2/2012-03-21Commission Delegated Regulation (EU) No 449/2012 of 21 March 2012 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards on information for registration and certification of credit rating agencies (Text with EEA relevance)Commission Delegated Regulation (EU) No 449/2012Commission Delegated Regulation (EU) No 449/2012 of 21 March 2012 supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council with regard to regulatory technical standards on information for registration and certification of credit rating agencies (Text with EEA relevance)King's Printer of Acts of Parliamenthttps://webarchive.nationalarchives.gov.uk/eu-exit/https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32012R0449texttext/xmlen2024-01-022012-03-21 CHAPTER 2 <Strong>REGISTRATION</Strong> SECTION 1 <Strong> <Emphasis>General</Emphasis> </Strong> Format of the application Article 2 1 An application for registration shall be provided in an instrument which stores information in a way accessible for future reference and which allows the unchanged reproduction of the information stored. 2 A credit rating agency shall give a unique reference number to each document it submits. It shall ensure that the information it submits clearly identifies to which specific requirement of this Regulation it refers and in which document that information is provided. The credit rating agency shall submit the table set out in Annex I as part of its application to clearly identify the document in which information required under this Regulation is provided. 3 If a requirement of this Regulation does not apply to a credit rating agency’s application, it shall state this in the table set out in Annex I and provide an explanation. 4 Where a group of credit rating agencies applies for registration, the application shall clearly identify each credit rating agency to which the information applies. When the same information applies to more than one credit rating agency within the group of credit rating agencies, for the purpose of filling in the table of Annex I, the same reference number shall be given for the common information. Attestation of the accuracy and completeness of the application Article 3 Any information submitted to ESMA during the registration or certification process shall be accompanied by a letter signed by a member of the credit rating agency’s senior management or a representative authorised by the senior management, attesting that the submitted information is accurate and complete to the best of their knowledge, as of the date of that submission. Number of employees Article 4 Any information regarding the number of employees shall be provided on a full time equivalent basis calculated as the total hours worked divided by the maximum number of hours subject to compensation within a working year as defined by the relevant national law. Class of credit ratings Article 5 Any information regarding the class of credit ratings shall use the following ratings classes: sovereign and public finance ratings; structured finance ratings; corporate ratings: financial institution including credit institutions and investment firms; insurance undertaking; corporate issuer that is not considered a financial institution or an insurance undertaking. Policies and procedures Article 6 1 Policies and procedures provided in an application shall contain or be accompanied by: a an indication of who is responsible for the approval and maintenance of the policies and procedures; b a description of how compliance with the policies and procedures will be enforced and monitored and who is responsible for this; c a description of the measures undertaken in the event of a breach of the policies; d an indication of the procedure for reporting to ESMA a material breach of the policy or procedure which may result in a breach of the conditions for initial registration or certification. 2 A credit rating agency may fulfil the obligation to provide information regarding its policies and procedures under this Regulation by submitting a copy of the relevant policies and procedures. Identification, legal status and class of credit ratings Article 7 A credit rating agency shall provide ESMA with: the information listed in Annex II to this Regulation; an excerpt from the relevant commercial or court register, or other form of evidence of the place of incorporation and scope of business activity of the credit rating agency, as of the application date. SECTION 2 <Strong> <Emphasis>Ownership structure</Emphasis> </Strong> Owners and parent undertaking of a credit rating agency Article 8 1 A credit rating agency shall provide ESMA with: a a list of each person who directly or indirectly holds 5 % or more of the credit rating agency’s capital or of voting rights or whose holding makes it possible to exercise a significant influence over the management of the credit rating agency; b the information set out in points 1 and 2 of Annex III in relation to each such person. 2 A credit rating agency shall also provide the following information to ESMA: a a list of any undertakings in which a person referred to in paragraph 1 holds 5 % or more of the capital or voting rights or over whose management that person exercises a significant influence; b an identification of their business activity referred to in point 3 of Annex III. 3 Where a credit rating agency has a parent undertaking, it shall: a identify the country where the parent undertaking is established; b indicate whether the parent undertaking is authorised or registered and subject to supervision. Ownership chart Article 9 A credit rating agency shall provide ESMA with a chart showing the ownership links between any parent undertaking, subsidiaries and any other associated entities established in the Union and their branches. The undertakings shown in the chart shall be identified by their full name, legal status and address of the registered office and head office. SECTION 3 <Strong> <Emphasis>Organisational structure and corporate governance</Emphasis> </Strong> Organisational chart Article 10 A credit rating agency shall provide ESMA with an organisational chart detailing its organisational structure, including a clear identification of significant roles and the identity of the person responsible for each significant role. Significant roles shall include at least senior management, persons who direct the activities of the branches and senior rating analysts. Where the credit rating agency conducts ancillary services, the organisational chart shall also detail its organisational structure in respect of those services. Organisational structure Article 11 1 A credit rating agency shall provide to ESMA information regarding its policies and procedures in relation to its compliance function as set out in point 5 of Section A of Annex I to Regulation (EC) No 1060/2009, review function as set out in point 9 of Section A of Annex I to Regulation (EC) No 1060/2009 and information regarding its policies and procedures established to meet the requirements set out in points 4 and 10 of Section A of Annex I to Regulation (EC) No 1060/2009. The information provided under this paragraph shall include the information set out in Annex IV points 1, 3 and 4. 2 Where the policies and procedures referred to in paragraph 1 are carried out at group of undertakings level, a credit rating agency shall also provide ESMA with the information set out in Annex IV point 2. 3 A credit rating agency shall also provide ESMA with the information set out in Annex X. Corporate governance Article 12 1 A credit rating agency shall provide ESMA with information regarding its internal corporate governance policies and the procedures and terms of reference which govern its senior management, including the administrative or supervisory board, its independent members and, where established, committees. 2 Where a credit rating agency adheres to a recognised corporate governance code of conduct, it shall identify the code and provide an explanation for any situations where it deviates from the code. 3 A credit rating agency shall provide the information set out in points 1 and 2 of Annex V on the members of its administrative or supervisory board. 4 A credit rating agency shall provide ESMA with a copy of the documents referred to in point 3 of Annex V. SECTION 4 <Strong> <Emphasis>Financial resources for the performance of credit rating activities</Emphasis> </Strong> Financial reports Article 13 1 A credit rating agency shall provide ESMA with a copy of its annual financial reports, including individual and consolidated financial statements where applicable, for the three financial years preceding the date of the submission of its application to the extent available. Where the financial statements of the credit rating agency are subject to statutory audit within the meaning given in Article 2(1) of Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, the financial reports shall include the audit report on the annual and consolidated financial statement. 2 Where the financial reports referred to in paragraph 1 are not available for the requested period of time, a credit rating agency shall provide ESMA with an interim financial report. 3 Where the credit rating agency is a subsidiary of a group of undertakings, it shall provide the annual financial reports of the parent undertaking for the three financial years preceding the date of the submission of its application. 4 A credit rating agency shall provide ESMA with a description of the measures it has adopted to ensure sound accounting procedure. SECTION 5 <Strong> <Emphasis>Staffing and compensation</Emphasis> </Strong> Staffing policies and procedures Article 14 1 A credit rating agency shall provide ESMA with information regarding the following policies and procedures: a reporting to the compliance officer of any situations where one of the persons referred to in point 1 of Section C of Annex I to Regulation (EC) No 1060/2009 considers that any other such person has engaged in conduct that he or she considers illegal, pursuant to the provisions of point 5 of Section C of Annex I to Regulation (EC) No 1060/2009; b the rotation of lead rating analysts, rating analysts and persons approving credit rating; c the compensation and performance evaluation practices for rating analysts, persons approving credit ratings, senior management and the compliance officer; d the training and development relevant to the rating process, including any examination or other type of formal assessment required for the conduct of rating activities. 2 A credit rating agency shall also provide ESMA with: a a description of the measures in place to mitigate the risk of over-reliance on individual employees; b for each class of credit ratings, information on the size and experience of the quantitative teams responsible for developing and reviewing methodologies and models; c the name and function of any employee of the credit rating agency who has obligations, either individually or on behalf of the credit rating agency, to any other entity within the group of credit rating agencies; d the average annual fixed and variable remuneration of the rating analysts, lead analysts and the compliance officer for each of the preceding three financial years. 3 A credit rating agency shall describe the arrangements in place to ensure that it is informed when a rating analyst terminates his or her employment and joins a rated entity as set out in point 6 of Section C of Annex I to Regulation (EC) No 1060/2009. A credit rating agency shall describe the arrangements in place to ensure that the persons referred in point 1 of Section C of Annex I to Regulation (EC) No 1060/2009 are aware of the prohibition established as set out in point 7 of Section C of Annex I to Regulation (EC) No 1060/2009. Fitness and appropriateness Article 15 1 A credit rating agency shall provide ESMA with the curriculum vitae, including employment history with relevant dates, identification of positions held and a description of the functions occupied, for each of the following: a members of senior management; b persons appointed to direct the business of the branches; c officers responsible for internal audit, internal control, compliance function, risk assessment and review function. 2 A credit rating agency shall provide ESMA with the following information in respect of each member of its senior management: a a recent criminal-record file from the country of origin of the relevant person, unless the relevant national authorities do not issue such a file; b a self-declaration of their good repute including at least the statements set out in Annex VI and signed by the individual. SECTION 6 <Strong> <Emphasis>Issuance and review of credit ratings</Emphasis> </Strong> Development, validation, review and disclosure of rating methodologies Article 16 1 A credit rating agency shall provide ESMA, for each class of credit rating, with a high-level description of the range of core models and methodologies used to determine credit ratings. 2 A credit rating agency shall provide ESMA with the following information regarding its policies and procedures: a information regarding the development, validation and review of its rating methodologies, including at least the information set out in point 1 of Annex VII; b information regarding the disclosure of the credit methodologies and descriptions of models and key rating assumptions used in its credit rating activities as set out in point 5 of Part I of Section E of Annex I to Regulation (EC) No 1060/2009. Issuance of credit ratings Article 17 1 A credit rating agency shall provide ESMA with the following information: a the rating nomenclatures used for each class of credit rating; b the definition of any rating action and statuses used by the credit rating agency; c its policies and procedures regarding the issuance of credit ratings, including at least the information set out in point 2 of Annex VII; d the terms of reference of any rating committees; e a description of the arrangements in place for disclosing a rating decision, including at least the information set out in point 3 of Annex VII; f a description of the procedures in place to ensure that a methodology is applied and implemented consistently across classes of credit rating, offices and regions. 2 A credit rating agency shall identify any differences between the treatment of unsolicited and solicited ratings in the policies and procedures provided under points (c) and (e) of paragraph 1. 3 Where the rating process is regularly audited by an independent third party, a credit rating agency shall provide ESMA with the last audit report. 4 A credit rating agency shall also provide ESMA with the following information: a details and criteria for the selection of data providers; b details on the reliability of internal and external data input into rating models; c details of the data sources used. Monitoring of credit ratings Article 18 A credit rating agency shall provide ESMA with information regarding its policies and procedures concerning: the monitoring of ratings, identifying any differences between solicited and unsolicited ratings, and including at least the information set out in point 4 of Annex VII; the disclosure of the decision to review or change a rating; the monitoring of the impact of changes in macroeconomic or financial market conditions on credit ratings as described in Article 8(5) of Regulation (EC) No 1060/2009. SECTION 7 <Strong> <Emphasis>Description of issue and review procedures and methodologies</Emphasis> </Strong> Credit rating presentation requirements Article 19 A credit rating agency shall provide ESMA with information regarding the following items: policies and procedures with respect to the credit rating disclosure requirements laid down in the following provisions of Regulation (EC) No 1060/2009: paragraphs 1, 2 and 5 of Article 10; Part I of Section D of Annex 1; where the credit rating agency rates structured instruments, policies and procedures with respect to the following provisions of Regulation (EC) No 1060/2009: Article 10(3); point 4 of Section B of Annex I; Part II of Section D of Annex I; samples of typical credit rating reports or other documents demonstrating how the credit rating agency meets or intends to meet these disclosure requirements; and samples of typical rating letters for each class of credit rating produced by the credit rating agency. SECTION 8 <Strong> <Emphasis>Conflicts of interest</Emphasis> </Strong> Independence and avoidance of conflicts of interest Article 20 1 A credit rating agency shall provide ESMA with information regarding its policies and procedures with respect to the identification, management and disclosure of conflicts of interest and the rules on rating analysts and other persons directly involved in credit rating activities covering at least the requirements set out in Annex VIII. 2 A credit rating agency shall describe the process used to ensure that the relevant persons are aware of the policies and procedures referred to in paragraph 1. A credit rating agency shall describe the arrangements in place to ensure that the review function responsible for reviewing the methodologies set out in point 9 of Section A of Annex I to Regulation (EC) No 1060/2009 is independent of the business lines which are responsible for credit rating activities. 3 A credit rating agency shall describe the controls put in place, including the controls implemented through information systems, in order to comply with the requirements of paragraphs (2) and (3) of Article 7 of Regulation (EC) No 1060/2009 on the negotiation of fees and the rules on persons involved in rating activities. 4 A credit rating agency shall describe any other measures and controls put in place to ensure the independence of its rating analysts. Inventory of conflicts of interest Article 21 1 A credit rating agency shall provide ESMA with an up-to-date inventory of existing and potential conflicts of interest relevant to it. Where a credit rating agency is part of a group of undertakings, it shall include in the inventory any conflicts of interest arising from other entities which belong to its group of undertakings. 2 The inventory of existing and potential conflicts of interest shall identify the following potential conflicts of interest: a any potential conflicts of interest with related third parties; b any potential conflicts of interest arising from the carrying out of ancillary services and the outsourced rating activities; 3 The inventory referred to in paragraph 1 shall explain how the potential conflicts of interest are to be eliminated or managed and disclosed. Conflicts of interest with respect to ancillary services Article 22 1 A credit rating agency shall provide ESMA with a description of the resources, both human and technical, shared by the rating and ancillary services of the credit rating agency or shared with the group of undertakings to which it belongs. 2 A credit rating agency shall describe the arrangements in place to prevent, disclose and mitigate any existing or potential conflicts of interest between the rating business and ancillary services. 3 A credit rating agency shall provide ESMA with a copy of the results of any internal assessment performed to identify any existing or potential conflict of interest between the rating business and ancillary services. SECTION 9 <Strong> <Emphasis>Programme of operations</Emphasis> </Strong> Information regarding the programme of operations Article 23 A credit rating agency shall provide ESMA with the annual information described in Annex IX covering a period of three years following the date of registration. SECTION 10 <Strong> <Emphasis>Use of endorsement</Emphasis> </Strong> Expected use of endorsement Article 24 Where a credit rating agency intends to endorse credit ratings issued in third countries as set out in Article 4(3) of Regulation (EC) No 1060/2009, it shall provide ESMA with the information set out in Annex XI. SECTION 11 <Strong> <Emphasis>Outsourcing</Emphasis> </Strong> Outsourcing requirements Article 25 1 Where a credit rating agency outsources any important operational functions, it shall provide ESMA with the following information: a its policies with respect to outsourcing; b an explanation on how it intends to identify, manage and monitor the risks posed by the outsourcing of important operational functions; c a copy of the outsourcing agreements between the credit rating agency and the entity to which the activities are outsourced; d a copy of any internal or external report on the outsourced activities issued in the past five years. 2 For the purposes of paragraph 1, important operational functions shall comprise rating review, lead analyst, rating methodology development and review, rating approval, internal quality control, data storage, IT systems, IT support and accounting. OJ L 157, 9.6.2006, p. 87.