1.[F1[F2The PRA may] make technical standards] to specify for all ECAIs, with which of the credit quality steps set out in Section 2 the relevant credit assessments of the ECAI correspond ( ‘ mapping ’ ). Those determinations shall be objective and consistent.
F3...
2.When determining the mapping of credit assessments, [F4the PRA] shall comply with the following requirements:
(a)in order to differentiate between the relative degrees of risk expressed by each credit assessment, [F4the PRA] shall consider quantitative factors such as the long-term default rate associated with all items assigned the same credit assessment. For recently established ECAIs and for those that have compiled only a short record of default data, [F4the PRA] shall ask the ECAI what it believes to be the long-term default rate associated with all items assigned the same credit assessment;
(b)in order to differentiate between the relative degrees of risk expressed by each credit assessment, [F4the PRA] shall consider qualitative factors such as the pool of issuers that the ECAI covers, the range of credit assessments that the ECAI assigns, each credit assessment meaning and the ECAI's definition of default;
(c)[F4the PRA] shall compare default rates experienced for each credit assessment of a particular ECAI and compare them with a benchmark built on the basis of default rates experienced by other ECAIs on a population of issuers that present an equivalent level of credit risk;
(d)where the default rates experienced for the credit assessment of a particular ECAI are materially and systematically higher then the benchmark, [F4the PRA] shall assign a higher credit quality step in the credit quality assessment scale to the ECAI credit assessment;
(e)where [F4the PRA] [F5has] increased the associated risk weight for a specific credit assessment of a particular ECAI, and where default rates experienced for that ECAI's credit assessment are no longer materially and systematically higher than the benchmark, [F4the PRA] may restore the original credit quality step in the credit quality assessment scale for the ECAI credit assessment.
3.[F6[F7The PRA may] make technical standards] to specify the quantitative factors referred to in point (a), the qualitative factors referred to in point (b) and the benchmark referred to in point (c) of paragraph 2.
F8...]
Textual Amendments
F1Words in Art. 136(1) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 224(5)(a)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
F2Words in Art. 136(1) substituted (1.1.2022) by Financial Services Act 2021 (c. 22), s. 49(5), Sch. 1 para. 24(2); S.I. 2021/671, reg. 5(1)(b) (with reg. 5(2)) (as amended by S.I. 2021/1163, regs. 1(2), 2)
F3Words in Art. 136(1) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 224(5)(a)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
F4Words in Art. 136(2) substituted (1.1.2022) by Financial Services Act 2021 (c. 22), s. 49(5), Sch. 1 para. 24(3)(a); S.I. 2021/671, reg. 5(1)(b) (with reg. 5(2)) (as amended by S.I. 2021/1163, regs. 1(2), 2)
F5Word in Art. 136(2)(e) substituted (1.1.2022) by Financial Services Act 2021 (c. 22), s. 49(5), Sch. 1 para. 24(3)(b); S.I. 2021/671, reg. 5(1)(b) (with reg. 5(2)) (as amended by S.I. 2021/1163, regs. 1(2), 2)
F6Words in Art. 136(3) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 224(5)(c)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
F7Words in Art. 136(3) substituted (1.1.2022) by Financial Services Act 2021 (c. 22), s. 49(5), Sch. 1 para. 24(4); S.I. 2021/671, reg. 5(1)(b) (with reg. 5(2)) (as amended by S.I. 2021/1163, regs. 1(2), 2)
F8Words in Art. 136(3) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 224(5)(c)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)