International & EU

 

The recognition of ECAIs for the standardised approach to credit risk and the ratings based approach to securitisation.

What is the timing for the recognition of ECAIs?

The Committee of European Banking Supervisors (CEBS) continues to make strong progress towards the finalisation of a European joint assessment process for recognising External Credit Assessment Institutions (ECAIs). This is intended to be completed at the meeting of CEBS in mid-January 2006

We (the FSA) strongly support the CEBS' process on this. While the CEBS guidelines have not yet been finalised, our approach is likely to be fully in line with them.

Under the draft guidelines, the recognition process is triggered by information being provided to the competent authorities at the national level. We wish to inform market participants that entities seeking recognition for these purposes should submit recognition information to us from the 1 February 2006.

What happens then?

This will initiate a 'shadow' recognition and mapping process – at the national and cross-border European level as appropriate. The assessment of ECAIs will follow the process outlined by CEBS in Consultation Paper 7 (CP07) subject to any further amendments in light of the responses received to CP07.

We intend to make 'shadow' decisions concerning the recognition of eligible ECAIs and the 'mapping' of their ratings by the end of June 2006 at the latest - subject to information being submitted on time. Making a list of eligible ECAIs and their mapping available in good time is important for firms preparing to use the Standardised Approach and the Securitisation Ratings Based Approach from 1 January 2007. Formal recognition – which will take place once the CRD has come into effect – will be based on the shadow recognition process and, subject to any material changes in the information, will not normally involve the duplication of effort by participants.

What do you need to do?

We suggest that participants seeking recognition should prepare their information packs in line with the 'Common Basis Application Pack' referred to in CP07 Annex 1. While some changes to this pack are possible, we consider that these are unlikely to be problematic.

Information packs should be sent to:

ECAI recognition
Head of Department's Office
Prudential Standards Department
Wholesale and Prudential Policy Division
FSA
25 The North Colonnade
Canary Wharf
London E14 5HS

Email: ECAI-recognition@fsa.gov.uk

Contacts: Keith Davies (ext 61262), Tamiko Bayliss (ext 64180), or for securitisation aspects Rob Robinson (ext 69298)