External Credit Assessment Institution Recognition Provisions

Original Language Title: Ārējās kredītu novērtējuma institūcijas atzīšanas noteikumi

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Read the untranslated law here: https://www.vestnesis.lv/ta/id/157414

Financial and capital market Commission Regulation No. 65 of 2007 in Riga in May (pr 2. No 19 7. p.)
External credit assessment institution recognition rules Issued in accordance with article 35.1 of the law of credit institutions fifth i. General questions 1. determines the order in which the Financial and capital market Commission (hereinafter the Commission) recognizes the external credit assessment institutions (ECAIs hereinafter) on the appropriate use of the credit rating of banks, investment companies and investment management firms (hereinafter the authority) in the calculation of capital requirements for credit risk in using the standardised approach (t.sk. vērtspapirizēšan for position risk weighted value calculation) and using the internal ratings based approach vērtspapirizēšan for position risk weighted value calculation According to the Commission's may 2, 2007.-Regulation No. 60 "minimum capital requirements rules".
2. the Commission on the application of the provisions of paragraph 1 may be recognised for that purpose (hereinafter referred to as the recognition) the ECAIs, the credit assessment of the credit risk of which the capital requirement calculated using the standardised approach (t.sk. vērtspapirizēšan for position risk weighted value calculation) and using the internal ratings based approach for position risk vērtspapirizēšan the weighted value calculation (hereinafter referred to as the calculation of capital requirements for credit risk), plans to use at least one registered in the Republic of Latvia.
3. The Commission accepted ECAI or ECAIs, the Authority plans to use the ECAI credit assessment of the credit risk in the calculation of capital requirements, go to the application of the Commission (hereinafter referred to as the application), which include: 3.1 if the applicant is, rules part II ECAIS of that information;
3.2. If the applicant is an institution, 13.2 and 13.4. information referred to in paragraph 1.
4. at the request of the Commission, the ECAI provides descriptive information about the structure of the ECAI credit assessment and allocation methodology and, if the applicant is an institution, the information referred to in part II.
5. the Commission shall not consider the application of the authority of the ECAI, which is one of consolidation group with the authority.
6. Where a parent undertaking which is the ECAIs and has subsidiaries that have ECAI, it can be shown that each subsidiary to which it wants to gain recognition, respect the group level defined practices and procedures, the parent company may submit a joint application for the parent company and all subsidiaries companies which want to get recognition.
7. the information referred to in paragraph 3 shall be Latvian or English. If the ECAI has submitted an application (or intends to submit within one year) for recognition in another Member State, provide the ECAI the information referred to in part II in English.
8. that the ECAI has been recognised or which the Commission examined the application, inform the Commission without delay of any substantial changes in the structure or the ECAI credit assessment allocation methodology.
9. the ECAI which has been determined, once a year send the Commission a 17.1.2., and in paragraph 17.2.3 17.1.3. these data and other information that ECAI is deemed necessary for the assessment of compliance of credit ECAI credit quality grade and vērtspapirizēšan position in quality grade (hereinafter credit rating scale matching).
10. If the Commission finds that the ECAI credit assessment of the structure and its allocation methodology is significantly amended and no longer meets the law of credit institutions, the requirements set out in article 35.1, the Commission may decide on the cancellation of the recognition of ECAIs.
11. At least every five years thereafter, the Commission itself or in cooperation with the national supervisory authorities and the ECAI credit made assessment methodologies for granting eligibility requirements of the law of credit analysis.
II. recognition of ECAIs necessary information the ECAI recognition 12. information necessary to include: 12.1. information on the use of ECAI credit assessments for the calculation of capital requirements for credit risk;
12.2. information on ECAIs and its structure;
12.3. for information on ECAI credit assessment methodologies;
12.4. information certifying that the ECAI credit assessment of the assigned individual (individual credit assessment) is available and the market demand;
12.5. the ECAI credit assessment information scale.
13. information on the use of ECAI credit assessments for the calculation of capital requirements for credit risk include: 13.1. Republic of Latvia registered the name of the authority, which plans to use the credit assessments of ECAIs, and these authorities proof of intention to use the relevant ECAI credit assessment of the credit risk in the calculation of capital requirements;
13.2. the date from which the authority intends to use the relevant ECAI credit assessment of the credit risk in the calculation of capital requirements;
13.3. the list of Member States (if any): 13.3.1. which recognised ECAIS, 13.3.2. which ECAIs submitted (or nearest year intends to submit) application for recognition;
13.4. market segment (asset classes) (i.e., public finance, commercial companies, structured finance), which the ECAI credit assessment is used to determine the level of risk, the list and the information or recognition includes the use of the credit assessment of the position of the vērtspapirizēšan the determination of the degree of risk.
14. information on ECAIs and its structure include: 14.1. shareholders with significant ECAIS participation list, indicating the participation of each such shareholder;
14.2. If the ECAI covers consolidation group, the structure of the Group;
14.3. the organisational structure of the ECAI;
14.4. a list of the countries whose residents ECAIs credit assessments;
14.5. full-time employees total number of employees;
14.6. the largest customer (the revenue from which provide 5 percent or more of the ECAIs total revenue), the number of these clients earned revenue totals and percentage of ECAIs total revenue;
9.1. in the last three years of financial statements of the ECAI, as well as, if possible, the forecast for the next three years;
14.8. the assessment of credits form-the customer ordered or ordered (solicited) (unsolicited) – not the ordered credit assessment rate (percentage) of the total number of assigned credit rating, as well as credit assessments for the determination of the type of policy;
9.3. code of conduct (code of conduct) that meet market standards or international principles, if the ECAI has been designed and it followed.
15. On ECAIs credit assessments methodology information includes: 15.1. information to assess whether the ECAI credit assessment methodology is objective (accurate, systematic, consistent and subject to evaluation, based on historical experience): 15.1.1. credit assessment methodologies and a general description of the process, which also includes the characteristics of the process that have been put in place to ensure the consistent application of the methodology for the evaluation of all credit ratings, indicating evaluation analyst or the Committee (or a substantially similar structure) role , guidelines that must be followed, URu.tml.;
15.1.2. the definition of a methodology, implementation and amendment of the agenda;
15.1.3. for each market segment (assets category) enter a general description of the data, which includes the key variables, data sources, assumptions, and quantitative techniques of the units being valued for the amount of information URu.tml.;
15.1.4. for each market segment (asset classes) of quality resources (for example, the company's strategy, action plan) General description;
15.1.5. the application of the methodology of regional characteristics;
15.1.6. Description of the method used to verify the accuracy of the rating system, and resolution (discriminatory power), and detailed information about such test results and conclusions;
15.2. information to assess whether the ECAI credit assessment methodology is an independent (not subject to political influence and external economic pressure, which could affect credit rating): 15.2.1 procedures designed to ensure fair and equitable credit assessment, including mechanisms to identify, prevent, manage and resolve actual or potential conflicts of interest;
15.2.2. detailed description of the precautionary measures which apply in the case where the estimated ECAIs shareholders, subsidiaries or other related companies within the consolidation group of the ECAI;
15.2.3. information indicating the existence of the internal audit service and the effective implementation of internal procedures;
15.2.4. information demonstrating that the assessment of the credit analysts have the necessary skills at the appropriate level and that these skills are retained over time and develop the appropriate training activities;
15.2.5. information certifying that the credit assessment of the staff remuneration policy shall not affect the credit rating of the independence and impartiality of such as confirmation that the analyst remuneration is not linked to the credit assessment of the issuer, the level of payments, revenue from investors;
15.2.6. details of service pricing for ECAIS (fe) policy;

15.2.7. information certifying that the credit assessment process personnel involved do not have any business relationship with units being valued, that could interfere with independent and high-quality credit assessments;
15.3. information to assess whether the ECAI credit assessment methodologies are regularly (at least once a year or after important events) revised: 15.3.1 General information about credit rating review, for example, implemented processes magnitude, the frequency of the staff involved, the tools used, tracking, data updates, the structure of the information provided is taken into account, the automated warning systems, mechanisms for systemic errors in the assessment of credits allows to solve with possible changes in the method of valuation URu.tml.;
15.3.2. credit assessments carried out a summary of the results of the review;
15.3.3. information demonstrating that retroactive testing system (back-test ting) is implemented and running for at least one year;
15.3.4. contacts with units assessed senior management arrangements;
15.3.5. units assessed the impact of changes in financial position for the credit assessment;
15.3.6. procedures to ensure that the Commission promptly informed of substantial changes in the ECAI credit assessment methodologies;
15.4. information certifying that the ECAI credit assessment methodologies is available to the public: 15.4.1. outline on the way and methodology to be used in any language available to the public, and for the credit assessment accessibility regulations for all potential users;
15.4.2. disclosure policy statement on the evaluation of the credit granted, the customer ordered, or not ordered.
16. Of the assigned individual ECAI credit assessment information to be provided includes: 16.1. evidence which confirms the market confidence in the individual credit assessment, such as market share, number of issuers, how long the ECAI market worked, income from operations, evaluation or any other evidence;
16.2. evidence that individual credit assessments are accessible at equivalent terms to all the bodies there is a legitimate interest of credit (legitimat) assessment.
ECAI credit assessment 17 scale matching information necessary to include: 17.1. alignment with the credit quality level: 17.1.1. defaults (default);
17.1.2. the cumulative default rates (Cumulative default rate, hereinafter referred to as the SNR) period of three years for each credit rating category, and at least two last SNR, if available;
17.1.3. the average ten year period three years SNR (the ten-year average of the three-year Cumulative default rate). If such data are not available, indicate the ECAIs predictions regarding the long-term default rate of any indebtedness, which is assigned the same credit assessment;
17.1.4. default probability of target (target probability of default) for each credit rating category, if one is used;
17.1.5. the methodology used for the calculation of SNR description;
17.1.6. the default pointer statistical significance;
17.1.7. dynamic evaluation methodology features (specific time or cyclical) (point-in-time or through the cycle);
17.1.8. credit rating category;
17.1.9. Ecais credit assessments awarded circle;
17.1.10. credit evaluation interval of time (time horizon);
17.1.11. transition matrix (transition matrix);
17.1.12. geographical coverage (Cove rage);
17.2. alignment with the vērtspapirizēšan position on the quality degree: 17.2.1. defaults (default)/impairment resulting from the deterioration in quality (impairmen), the definition of which is calculated in the defaults/impairment that occurs due to the deterioration of the quality indicators;
17.2.2. credit rating assumptions used in determining compliance to the present situation on the data (performance data) and the main features of the description (for example, determining the specific observations, the time range for which the research is carried out, as corrected and cancelled (curing and withdrawn) credit rating affect the credit rating of the conformity to the present situation on the research, and takes into account the seasonality);
17.2.3. data recovery for loss/loss related to the position vērtspapirizēšan;
17.2.4. the information referred to in paragraph 17.1.8., 17.1.12;
17.3. information about the units of investment funds or comparable securities (hereinafter referred to as? IFA) credit ratings, which include: 17.3.1. IF the assessment (which mainly assesses the investment portfolio (underlying assets) kredītkvalitāt);
17.3.2. information on what factors are taken into account and the extent to which each of them affects the IFA credit assessment;
17.3.3. the information referred to in paragraph 17.1.8., 17.1.12.
III. procedure for the recognition of ECAIS 18. when the application for recognition of ECAIs, the Commission shall assess the application of the laws and regulations of the compliance requirements and adopt one of the following decisions: 18.1 the direct recognition of ECAIs;
18.2. for indirect recognition of ECAIs.
19. the direct recognition of ECAIs are referred to in the submissions received ECAI assessment carried out by the Commission or by the Commission, in cooperation with the management authority of another Member State (hereinafter referred to as the common recognition). The Joint Commission is in the process of recognition by another Member State supervisory authorities agree on coordinating institution of the recognition process.
20. the indirect recognition of ECAIs are the management authority of another Member State of a decision on the recognition of ECAIs in question, the Commission does not take the examination.
Informative reference to European Union Directive provisions included standards resulting from European Parliament and Council Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions (recast).
Financial and capital market Commission President When the U.