On 15 March 2019, the FCA published a statement endorsing credit ratings from the EU into the UK for regulatory use in a no deal Brexit scenario. The FCA has assessed the EU regulatory regime to be ‘as stringent as’ the UK’s regime for the purposes of allowing UK registered credit rating agencies to endorse credit ratings into the UK from affiliated EU credit rating agencies for regulatory use, under the Credit Rating Agencies Regulation (as amended by as amended by The Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019 (Brexit SI).
Under the Brexit SI, any legal person wishing to issue or endorse credit ratings for regulatory purposes in a no deal Brexit scenario will need to be registered or certified with the FCA. The FCA has published a list of credit rating agencies currently registered or whom intend to register with the FCA. The endorsement of ratings from third-country affiliate credit rating agencies (which EU credit rating agencies will become) allows these ratings to be used by market participants for regulatory purposes. A condition for the endorsement of ratings from a third country into the UK is that the legal and supervisory framework of the third country is deemed to be as stringent as the UK’s – something the FCA has now confirmed applies to EU Member States.
The European Securities and Markets Authority (ESMA) has similarly assessed the UK’s regulatory and supervisory framework for credit rating agencies. On 15 March 2019, ESMA announced that the foreseen UK regulatory and supervisory regime for credit rating agencies in the event of a no deal Brexit meets its conditions for endorsement. This ESMA endorsement means that the outstanding credit ratings of UK-based CRAs will continue to be usable for regulatory purposes in the EU in the event of a no deal Brexit scenario.