[ESMA80-416-203 ] Guidelines on Disclosure Requirements for Initial Reviews and Preliminary Ratings

Following the publication of the Final Report on „disclosure requirements of credit rating agencies (CRAs) for initial reviews and preliminary ratings“ back in January 2022, ESMA now published translations into the official EU languages on its website.
To recall, in its consultation (please see EventID #11241 in this context), ESMA aimed to address the issue of “rating shopping“ which refers to the engagement of issuers with several credit agencies to issue a rating on debt instruments and/or the issuer and the subsequent „picking“ of issuers of the „best rating“.
In order to protect investors from the fact that „only“ the best ratings are publicly available, credit rating agencies must disclose certain information when conducting a preliminary assessment and issuing a preliminary rating of an instrument or issuer – regardless of the fact whether or not they will be chosen by an issuer for a final rating.
The guidelines – taking into account the comments received by respondents – outline the following key issues:
1. criteria to be applied to initial credit ratings to qualify as such under point 6 of Section D of Annex I of the CRA Regulation (Regulation (EC) No 1060/2009);
2. content to be disclosed by CRAs regarding such preliminary ratings and initial reviews (i.e. the name of the issuer, name of the instrument, LEI, asset class, etc.);
3. timing of publication of such preliminary ratings and reviews (first Wednesday of each month); and
4. “location“ of the disclosures (free accessible, without registration requirement of the user) and the notification of ESMA of such location.
The guidelines also set out the corresponding templates to be used by rating agencies for public disclosure.