ESMA · ESMA_QA_1469 Answer Published

Article 8(5a) and Article 14(3) – Notification of material changes to methodologies (ESMA33-5-87 Q&A 7)

Regulation
Credit Rating Agencies Regulation (CRAR) Regulation (EC) No 1060/2009
Topic
CRA Regulation
Submitted
2023-07-17
Answered
2023-07-17
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Question

When is a change to methodologies, models or key rating assumptions considered as a “material change”?

Answer

CRAs that intend to make a material change to methodologies, models, or key rating assumptions which could have an impact on a credit rating need to disclose the reasons for such changes. Material changes to methodologies, models, or key rating assumptions might include among others: i) a change in the key criteria used; ii) a change in the key rating assumptions and key variables used in the rating methodology; iii) a change in the respective weight of the qualitative and quantitative factors; iv) a change in the way driving factors are assessed; or v) a change that has a direct or indirect impact on a significant number of credit ratings. CRAs should explain in a comprehensive manner which of the above mentioned elements has significantly contributed to a change to methodologies, models, or key rating assumptions. The elements which have been changed should also be clearly disclosed.
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This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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