ESMA Concern on CRA, TR Fees
On Jan. 11, ESMA stated concerns on fees of CRAs and repositories.
- Report on fees charged by credit rating agencies (CRAs) and trade repositories (TRs).
- Follows ESMA review of fee structures in credit rating and trade repository industries.
- Analysed information from public sources, submissions, and requests for information.
- Areas Reviewed
- Assessed requirement that CRA fees should be non-discriminatory and based on cost.
- TRs to provide non-discriminatory access, charge publicly disclosed, cost-related fees.
- Identified improvements on transparency, fee-setting and interaction of other entities.
- Transparency Concerns
- Transparency and disclosure – CRAs/TRs need to ensure they provide sufficient, and
clear information on their fees, to their actual and potential clients, as well as ESMA.
- CRA clients should be able to understand major elements of the CRA schedule of fees.
- Reasons for deviations from it, in addition to the reasons of price increases/decreases.
- TRs can become more transparent using less complex, more comparable fee schedule.
- Disclosing sufficient information to enable clients to estimate additional reporting cost.
- Fee-Setting Concerns
- Fee-setting process –CRAs/TRs need to ensure cost is key pricing factor and controls
are in place, to demonstrate that the regulatory objectives regarding pricing are met.
- Interaction with Affiliates
- CRAs need to ensure that any provision of rating related services by affiliated entities
does not conflict with the non-discrimination and cost-based principles in regulations.
- TRs in a group, need to ensure that intra group transactions are on reasonable terms.
- Use arm’s–length principle to prevent discriminatory access and unfair cost allocation.
- Next Steps
- ESMA will seek information in monitoring CRAs and TRs’ pricing, commercial practices.
- Ensure customers know what they are paying for, and how the fees they pay were set.
- ESMA may provide further supervisory guidance to ensure compliance with regulation.
||B/D; Bank; CRA; Depo
||Rp ESMA80-196-954, PR 71/99/919, 1/11/2018
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||Banking; Corporate; CRA; Fixed Income
Last substantive update on 01/11/2018