The European Securities and Markets Authority has registered Inbonis SA, based in Madrid, as a CRA (credit rating agency) under the CRA Regulation, for purposes of issuing corporate ragings on issuers not considered financial institutions or insurance undertakings.
The Regulation seeks to ensure that credit ratings issued in the EU meet minimum standards of quality, transparency and independence. Only those registered by Esma as CRAs may lawfully issue credit ratings used for regulatory purposes by credit institutions, investment firms, insurance and reinsurance undertakings, institutions for occupational retirement provision, management companies, investment companies, alternative investment fund managers and central counterparties.
Companies seeking registration must show they comply with requirements of the CRA Regulation, including:
• the governance of CRAs and the management of conflicts of interest;
• the development and application of methodologies for assessing credit risk; and
• the disclosure of information to ESMA and to market participants.
Once registered, CRAs are subject to on-going monitoring and supervision by Esma to ensure that they continue to meet the conditions for registration. ESMA will impose sanctions where it finds that a CRA has failed to meet its obligations under the CRA Regulation.
The total number of CRAs registered in the EU is 29, of which four operate a group structure totalling 19 legal entities in the EU. This takes the total number of CRA entities registered to 44.
Inbonis rates companies from AAA (highest) to D (lowest), based on analysis of risk factors including business risk, financial risk, corporate governance and economic environment.
It has developed a methodology that it says is particularly focused on the small to medium sized enterprise (SME) area.