Poor s recently to downgrade its credit rating.

The credit ratings agency Standard amp

On the basis of the analyses by these highly regarded international agencies , the Commission selects only swap counterparties with a top notch credit rating

Poor s to strip France of its AAA credit rating.

When the collateral considered is default risk free ( e.g. government bonds ) , collateralisation is a way to transform credit risk into market risk ( managed with risk controls as described above ) as the defaultrisky counterparty provides a default risk free asset to guarantee its position . Even when the collateral itself can be defaultable ( as with corporate bonds ) , the credit risk is strongly mitigated if the credit quality of the bonds is sufficiently high .

( 37 ) ECAIs are commonly referred to as rating agencies in financial markets .

Static Pool for credit quality steps 1 and 2 Static Pool for credit quality step 3

quantitative monetary easing in March 2001 aimed at providing ample liquidity and keeping short term interest rates close to zero percent .

Specifically , it may be easier for non appointed CRAs to issue unsolicited credit ratings , since they will be given access to information provided by the issuer to the appointed CRA .

Such a copy is not requested when such information is transmitted directly by the relevant supervisory authority to the relevant national central bank .

And my brother says, I got the top grade in the class.

ECB Opinion on Community legislation on credit rating agencies operating in Europe

Rating requirements for asset backed securities in Eurosystem credit operations

First , under the proposed arrangements , the CRA appointed to issue a credit rating in a given case is expected to be subject to increased competition from other eligible CRAs ( non appointed CRAs ) .

Such reporting should be included in periodic disclosures made by CRAs to ESMA ( 4 ) .

Given this, it is no surprise that Moody s downgraded France s credit rating last year.

Proposal for a Regulation of the European Parliament and of the Council on Credit Rating Agencies , pdf 141 kB , en

The Governing Council has decided to amend the rating requirements for asset backed securities ( ABSs ) .

Finally, to finance the plan, the EU could use its AAA borrowing capacity to issue long term bonds.

First , each issue needs to be awarded a rating ( by a rating agency ) which indicates , in the view of the Eurosystem , that the debt instrument meets high credit standards .

The proposed regulation requires that each appointed CRA delivers to its competitors a list of the structured finance instruments currently being rated by it , together with a link to the website where the issuer stores the information used in the preparation of credit ratings .

With regard to RMBDs , the Eurosystem 's benchmark for establishing its mini mum requirement for high credit standards is defined in terms of a credit assessment of credit quality step 2 in the Eurosystem 's harmonised rating scale ( single A ) .

Such assets shall constitute eligible collateral for the purposes of Eurosystem monetary policy operations , irrespective of their external credit rating .

Access to the websites should only be granted if a credit rating agency is able to ensure the confidentiality of the requested information .'

A credit rating agency shall provide information to that repository on a standard form as provided for by ESMA .

Germany s credit rating would not be endangered, because Eurobonds would compare favorably with bonds issued by other major countries.

Third , the situation of the issuer itself will also need to be examined , taking into account such elements as ( a ) the burden related to allowing information access for non appointed CRAs and ( b ) protection against any potential misuse of the information received by the non appointed CRA .

Subject to point 8 , the risk weighted exposure amount of a rated securitisation or re securitisation position shall be calculated by applying to the exposure value the risk weight associated with the credit quality step with which the credit assessment has been determined to be associated by the competent authorities in accordance with Article 98 as laid down in Table 1 .

Access to the websites should only be granted if a credit rating agency is able to ensure the confidentiality of the requested information .

The ECB acts as the assessor arm of the Eurosystem in the analysis of eligibility of rating companies that rate collateral .

The third article reviews the main developments and policy issues relating to the regulatory treatment of credit rating agencies . back to top

When the borrowings contracted by the Community are the subject of a debt or interest rate swap , the commercial risk inherent in a transaction of that kind shall be minimised by recourse to a counterparty with a high quality credit rating .

The set of techniques and rules foreseen in the ECAF for bank loans will also be applicable to non rated marketable assets

assess the eligibility of external credit assessment institutions and allocate their credit assessments to an objective scale of credit quality steps

The introduction of such disclosure requirements aims to enhance the quality and transparency of the rating process for structured finance instruments , and might also contribute to increased competition between CRAs .

They have generally been considered low credit risk by rating agencies and market participants .

However , there may be considerable barriers to market entry for the non appointed CRAs related to ( a ) the statutory eligibility criteria for access to the issuer 's information and ( b ) informal knowledge available to the appointed CRA as a result of its long standing relations with the issuer .

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The ECB notes that CRAs will be required to provide their historical performance data to a central repository established by ESMA ( 5 ) .

For example, a loan to AAA rated Microsoft has a 0 risk weight, meaning that it is virtually risk free.

Poor argued that such a mechanism would provide credit rating agencies with less incentive to compete with one another, pursue innovation, and improve their models, criteria, and methodologies.

A credit rating agency shall provide information to that repository on a standard form , which shall be as provided for by ESMA in a format which is consistent with the Union statistical framework and which facilitates , through the use of common identifiers and standards , direct comparisons between historical data provided by different credit rating agencies .