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.

Regulators EU ESMA
Entity Types B/D; Bank; CRA; Depo
Reference Rp ESMA80-196-954, PR 71/99/919, 1/11/2018
Functions Advertising; Compliance; C-Suite; Financial; Legal; Reporting; Research; Risk; Treasury
Countries European Union
Products Banking; Corporate; CRA; Fixed Income
Regions EMEA
Rule Type Guidance
Rule Date 1/11/2018
Effective Date 1/11/2018
Rule Id 38389
Linked to N/A
Report Issue 1/15/2018
Report Section EU

Last substantive update on 01/11/2018