Article 5
Equivalence and certification based on equivalence
1. The credit ratings that are related to entities established or financial instruments issued in third countries and that are issued by a credit rating agency established in a third country may be used in the Community under Article 4(1) without being endorsed in accordance with Article 4(3), provided that:
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(a) |
the credit rating agency is authorised or registered in and is subject to supervision in that third country; |
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(b) |
the Commission has adopted an equivalence decision in accordance with paragraph 6 of this Article, recognising the legal and supervisory framework of that third country as equivalent to the requirements of this Regulation; |
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(c) |
the cooperation arrangements referred to in paragraph 7 of this Article are operational; |
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(d) |
the credit ratings issued by the credit rating agency and its credit rating activities are not of systemic importance to the financial stability or integrity of the financial markets of one or more Member States; and |
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(e) |
the credit rating agency is certified in accordance with paragraph 2 of this Article. |
2. The credit rating agency referred to in paragraph 1 may apply for certification. The application shall be submitted to the Committee of European Securities Regulators (CESR) in accordance with the relevant provisions of Article 15. Within five working days of receipt of the application for certification, CESR shall send the application to the competent authorities of all Member States, inviting them to consider becoming a member of the relevant college in accordance with Article 29(3)(b). The competent authorities that have decided to become members of the college shall notify CESR accordingly within 10 working days of receipt of CESR’s invitation. The competent authorities that notify CESR in accordance with this paragraph shall be members of the college. Within twenty working days of receipt of the application for certification, CESR shall draw up and publish on its website a list of the competent authorities that are members of the college. Within 10 working days of the publication, the members of the college shall select a facilitator in accordance with criteria in Article 29(5). Following the establishment of the college, its composition and functioning shall be governed by Article 29.
3. The application for certification shall be examined in accordance with the procedure set out in Article 16. The certification decision shall be based on the criteria set out in points (a) to (d) of paragraph 1 of this Article.
The certification decision shall be notified and published in accordance with Article 18.
4. The credit rating agency may also separately apply to be exempted:
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(a) |
on a case-by-case basis from complying with some or all of the requirements set out in Section A of Annex I and Article 7(4) if the credit rating agency is able to demonstrate that the requirements are not proportionate in view of the nature, scale and complexity of its business and the nature and range of its issuing of credit ratings; |
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(b) |
from the requirement of physical presence in the Community where such a requirement would be too burdensome and disproportionate in view of the nature, scale and complexity of its business and the nature and range of its issuing of credit ratings. |
When assessing that application, the competent authorities shall take into consideration the size of the applicant credit rating agency, having regard to the nature, scale and complexity of its business and the nature and range of its issuing of credit ratings, as well as the impact of the credit ratings issued by the credit rating agency on the financial stability and integrity of the financial markets of one or more Member States. On the basis of those considerations, the competent authority may grant such exemption to the credit rating agency.
5. The decisions on the exemptions under paragraph 4 of this Article shall be subject to the relevant provisions and procedures set out in Article 16 with the exception of the second subparagraph of paragraph 7 of that Article. In the event of continued absence of agreement among the members of the relevant college on whether to grant an exemption to the credit rating agency, the facilitator shall adopt a fully reasoned decision.
For the purposes of certification, including the granting of exemptions, and supervision, the facilitator shall perform the tasks of the competent authority of the home Member State where relevant.
6. The Commission may adopt an equivalence decision in accordance with the regulatory procedure referred to in Article 38(3), stating that the legal and supervisory framework of a third country ensures that credit rating agencies authorised or registered in that third country comply with legally binding requirements which are equivalent to the requirements resulting from this Regulation and which are subject to effective supervision and enforcement in that third country.
A third-country legal and supervisory framework may be considered equivalent to this Regulation if that framework fulfils at least the following conditions:
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(a) |
credit rating agencies in that third country are subject to authorisation or registration and are subject to effective supervision and enforcement on an ongoing basis; |
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(b) |
credit rating agencies in that third country are subject to legally binding rules which are equivalent to those set out in Articles 6 to 12 and Annex I; and |
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(c) |
the regulatory regime in that third country prevents interference by the supervisory authorities and other public authorities of that third country with the content of credit ratings and methodologies. |
The Commission shall specify further or amend the criteria set out in points (a) to (c) of the second subparagraph in order to take account of developments on financial markets. Those measures, designed to amend non-essential elements of this Regulation, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 38(2).
7. The facilitator shall establish cooperation agreements with the relevant competent authorities of third countries whose legal and supervisory frameworks have been considered equivalent to this Regulation in accordance with paragraph 6. Such arrangements shall specify at least:
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(a) |
the mechanism for the exchange of information between the competent authorities concerned; and |
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(b) |
the procedures concerning the coordination of supervisory activities. |
CESR shall coordinate the development of cooperation agreements between the competent authorities of Member States and the relevant competent authorities of third countries whose legal and supervisory frameworks have been considered equivalent to this Regulation in accordance with paragraph 6.
8. Articles 20, 24 and 25 shall apply mutatis mutandis to certified credit rating agencies and to credit ratings issued by them.