Thursday, 14 February 2019

UK: The Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019

The Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019 were made yesterday (February 13): see here or here (pdf). Part 1 ("General Provision") and Part 8 ("Transitional Provisions") of the Regulations come into force today (February 14) and Parts 2 to 7, 9 and 10 come into force on exit day (see reg 1(2) and (3). The Regulations are accompanied by an explanatory memorandum and an impact assessment: see, respectively, here (pdf) and here (pdf). To quote directly from the explanatory memorandum (para. 2.3):
After exit, CRAs established in the UK would not be covered by the EU regulatory regime under CRAR [Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009]. If this instrument is not in place by exit day, CRAR – which will be transferred to the UK statute book by the European Union (Withdrawal) Act 2018 (EUWA) – will not operate effectively in the UK. Amending CRAR to establish a UK regime for regulation and supervision of CRAs is therefore necessary. Furthermore, if the instrument establishing this regime is not in place by exit day, there would be a significant cliff edge risk, as credit ratings would not be able to be used for regulatory purposes in the UK and there would be no regulatory oversight of CRAs. If credit ratings in the UK were invalid, the capital requirement for the entities or assets they previously rated would increase as a greater risk weighting would be attached to them. Laying this instrument will help to ensure that firms, which can include any entity that seeks to borrow money, can continue to use credit ratings issued in the UK by CRAs as they do now."

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