Creditreform Rating Agency Is On the Way To Accreditation By The ECB
The Creditreform Rating AG, Neuss, has cleared a major hurdle to become one of the first European rating agencies of the European Central Bank (ECB). Currently, the rating market in Europe is dominated by the US agencies Standard & Poor’s, Moody’s and Fitch. They achieve a 93.4 per cent market share, according to the European Securities and Markets Authority (ESMA) responsible for credit rating agencies. “We want to penetrate the phalanx of established accredited agencies and will do everything we can to stimulate competition in the rating market,” says Dr. Michael Munsch, CEO Creditreform Rating AG.
In order to carry out credit ratings for the ECB, credit rating agencies must meet strict criteria. The Eurosystem Credit Assessment Framework (ECAF) requires a credit rating agency for two-thirds of euro area countries to have at least three out of four asset categories (uncovered bank bonds, Corporate bonds, covered bonds and asset-backed securities). In each asset class, it must provide ratings for at least ten per cent of non-bankable assets and issuers, as well as at least 20 per cent of outstanding nominal amounts. In addition, the credit rating agency is obliged to meet these criteria over three years.
Creditreform Rating met the ECB’s quantitative requirements for uncovered bank bonds and corporate bonds in December 2018. “In the covered bond category, we will cross the finish line at the turn of the year 2018/19,” Dr Michael Munsch points out. For Creditreform Rating, this meant an enormous feat of strength. In December, the three asset classes covered comprised about 20,200 securities from just under 740 issuers with a nominal volume of about 4.32 trillion euros. Country ratings to all euro area states have been releasing credit reform rating since the first quarter of 2017.
To apply for admission to the ECAF, Creditreform Rating must meet the criteria over the next three years. “We are confident that we will have completed the approval process by 2022 and will be included in the ECAF credit assessment framework,” says Dr Michael Munsch.
External credit ratings are of great importance in European financial markets. A bank can only file securities with the ECB as collateral if they have a rating of one of the credit rating agencies accredited to the ECB. In addition to the three US agencies Standard & Poor’s, Moody’s and Fitch, this is currently just the Canadian ratings agency DBRS.
The ECB’s asset purchase programme is particularly important for competition in the rating market. Again, only those papers that have an accredited agency’s rating are considered bankable. For banks, insurance companies, pension funds or companies, the assessment of smaller, unaccredited credit rating agencies is almost irrelevant, since their securities are not used in the purchase programme or under the Eurosystem’s collateralisation model. Can.