ANNEX VII
ISSUANCE AND REVIEW OF CREDIT RATINGS
(Articles 16, 17 and 18)
1. | The information regarding the policies and procedures referred to in Article 16(2)(a) regarding the development, validation and review of the CRA’s rating methodologies shall include: the responsibilities and process for rating methodology development and sign off, including details on the composition of the rating methodology committees and the procedures for members’ selection; the responsibilities and process for rating methodology, including: the verification and validation of a rating methodology; the validation of the rating methodology based on historical data, including how the results of the back-testing are taken into account. In addition, the credit rating agency shall also include the results of such validation/back-testing for the past three years, where quantitative data is available; the reporting of the outcome of the rating methodology review; and the implementation of a change in methodology, model or key rating assumptions. |
2. | The information regarding the policies and procedures referred to in Article 17(1)(c) regarding the issuance of credit ratings shall include: the sequence of steps followed for the production of ratings; the process for reviewing the documentation of issuers or securities to be rated. This shall include any benchmark used to facilitate the review; an assessment of the minimum information requirements to initiate and maintain a rating, including both public and non-public information; the controls mechanisms for the issuance of credit ratings, including the involvement of the issuer/arranger/investor/servicer within this process; the process for collation, analysis and assessment of the information used to determine a rating, including, where applicable, reliance on analysis by another credit rating agency or other third parties; the role and responsibilities of rating analysts, as well as the process and procedures for their selection on specific securities; the rating approval process, including the identification of the role and responsibilities of the persons approving the ratings as well as the process and procedures for their selection; where a credit rating agency has established rating committees, the role and responsibilities of rating committee chairs, as well as the skills required and the process and procedures for their nomination; and the minimum qualifications of the persons involved in the rating decision. |
3. | The information regarding the policies and procedures referred to in Article 17(1)(e) regarding the disclosure of a rating decision shall include the following: the process for notifying the rated entity of the principal grounds on which the rating is based at least 12 hours before publication of the credit rating; a rating appeal process, if a credit rating agency has implemented it; and the processes for determining which key elements underlying the credit rating shall be included in the press release or reports. |
4. | The information regarding the policies and procedures referred to in Article 18(a) regarding the monitoring of ratings shall include: the monitoring process, including the role and responsibilities of rating committees, where applicable, and a description of the rating approval processes; the role and responsibilities of rating analysts; the process for collation, analysis and assessment of the information used to monitor a rating, including, where applicable, reliance on analysis by another credit rating agency or other third parties; the process, including the overview of the factors considered, and the responsibilities for deciding when a rating should be formally reviewed, including rating actions; the process and the responsibilities for deciding when a rating should be formally suspended or withdrawn; the processes and controls with respect to credit rating reviews required by paragraphs (a) to (c) of Article 8(6) of Regulation (EC) No 1060/2009; and the policies, procedures and controls for the involvement of the issuer or arranger within the process. |