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Recital 18

Recital 18

(18)In order to be effective, the rotation mechanism needs to be enforced in a credible manner. The rotation requirement would not achieve its objectives if the outgoing credit rating agency were allowed to rate re-securitisations from the same originator again within too short a period. Therefore, it is important to provide for an appropriate period within which the outgoing credit rating agency cannot be appointed to rate re-securitisations from the same originator again. That period should be sufficiently long to allow the incoming credit rating agency to provide its credit rating services effectively, to ensure that the re-securitisations are truly exposed to a new scrutiny under a different approach, and to guarantee that the credit ratings issued by the new credit rating agency provide enough continuity. At the same time, for a rotation mechanism to function properly, the length of the period is constrained by the supply of credit rating agencies with sufficient expertise in the area of re-securitisations. Therefore, the length of the period should be proportionate, should generally be equal to the length of the expired contract of the outgoing credit rating agency but should not exceed four years.

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