The European Securities and Markets Authority (ESMA) has published technical advice to the European Commission on the development of an EU creditworthiness assessment for sovereign debt.

The technical advice covers sovereign ratings, rating processes including an overview of the market for sovereign ratings as well as lessons drawn from ESMA’s supervisory experience.

ESMA also identifies a number of key points that it believes are important when considering the appropriateness of the development of a creditworthiness assessment for sovereign debt. These include:

  • the rating process should be a fully independent assessment;
  • the review function responsible for the annual review of rating methodologies must be independent of the business lines that are responsible for credit rating agencies;
  • confidentiality of all rating sensitive information is critical. Also, access to pre-rating information should only be available to people involved in rating activities and all necessary steps should be taken to ensure this information is adequately protected; and
  • sufficient resources must be available for the conduct of both a rigorous rating process and ongoing monitoring.

View Technical advice in accordance with article 39(b) 2 of the CRA Regulation regarding the appropriateness of the development of a European creditworthiness assessment for sovereign debt, 18 July 2014