What changed, Commission Implementing Regulation (EU) 2016/1799 of 7 October 2016 laying down implementing technical standar…

− ## *CHAPTER 1* / ***Quantitative factors***
− 
− ## Section 1 / **Calculation of the quantitative factors of a rating category where a sufficient number of credit ratings is available**
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+ **1.** For the purpose of the short run default rate calculation, the number of items assigned the same rating category by the ECAI for which the mapping is being performed shall be deemed sufficiently numerous, where the items meet all of the following requirements:(a) they are sufficient with resp…
− 1. For the purpose of the short run default rate calculation, the number of items assigned the same rating category by the ECAI for which the mapping is being performed shall be deemed sufficiently numerous, where the items meet all of the following requirements:
+ **2.** For the purpose of the long run default rate calculation, the number of items assigned the same rating category by the ECAI for which the mapping is being performed shall be deemed sufficiently numerous where at minimum the most recent 10 short run default rates as referred to in paragraph 1 …
− (a) they are sufficient with respect to the perceived risk profile of the rating category, considering as an indicator, the number of items representing the inverse of the long run default rate benchmark of the rating category, as referred to in point (a) of Article 14;
− (b) they are representative of the most recent pool of items assigned the same rating category.
− 
− 2. For the purpose of the long run default rate calculation, the number of items assigned the same rating category by the ECAI for which the mapping is being performed shall be deemed sufficiently numerous where at minimum the most recent 10 short run default rates as referred to in paragraph 1 are …
− 
+ **1.** Where a sufficient number of credit ratings is available according to Article 3(1), the short run default rates referred to in Article 1 shall be calculated in the manner described in paragraphs 2 to 5.
− 1. Where a sufficient number of credit ratings is available according to Article 3(1), the short run default rates referred to in Article 1 shall be calculated in the manner described in paragraphs 2 to 5.
+ **2.** The short run default rates of a rating category shall be calculated over a 3-year time horizon as a ratio where:(a) the denominator represents the number of items assigned the same rating category present at the beginning of the time horizon;(b) the numerator represents the number of items r…
− 2. The short run default rates of a rating category shall be calculated over a 3-year time horizon as a ratio where:
+ **3.** Items withdrawn prior to the end of the time horizon and not defaulted shall only contribute to the denominator of the short run default rates referred to in point (a) of paragraph 2 with a weight equal to 50 %. Any item for which there is evidence that it has been withdrawn prior to the occu…
− (a) the denominator represents the number of items assigned the same rating category present at the beginning of the time horizon;
+ **4.** Items shall be considered to be defaulted items to be included in the numerator specified in point (b) of paragraph 2 where any of the following types of event has occurred:(a) a bankruptcy filing or legal receivership that will likely cause a miss or delay in future contractually required de…
− (b) the numerator represents the number of items referred to in point (a) that have defaulted prior to the end of the time horizon.
+ **5.** The short run default rates shall be calculated for each available pool of items assigned the same rating category on semi-annual periods, which are based on 1 January and 1 July of each year.
− 3. Items withdrawn prior to the end of the time horizon and not defaulted shall only contribute to the denominator of the short run default rates referred to in point (a) of paragraph 2 with a weight equal to 50 %. Any item for which there is evidence that it has been withdrawn prior to the occurren…
− 
− 4. Items shall be considered to be defaulted items to be included in the numerator specified in point (b) of paragraph 2 where any of the following types of event has occurred:
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− (a) a bankruptcy filing or legal receivership that will likely cause a miss or delay in future contractually required debt service payments;
− 
− (b) a missed or delayed disbursement of a contractually required interest or principal payment, unless payments are made within a contractually allowed grace period;
− (c) a distressed exchange if the offer implies the investor will receive less value than the promise of the original securities;
− 
− (d) the rated entity is under a significant form of regulatory supervision owing to its financial condition.
− 
− 5. The short run default rates shall be calculated for each available pool of items assigned the same rating category on semi-annual periods, which are based on 1 January and 1 July of each year.
− 
+ **1.** Where a sufficient number of credit ratings is available in accordance with Article 3, the long run default rate referred to in Article 1 shall be calculated according to paragraphs 2 to 4.
− 1. Where a sufficient number of credit ratings is available in accordance with Article 3, the long run default rate referred to in Article 1 shall be calculated according to paragraphs 2 to 4.
+ **2.** The long run default rate shall be calculated as the weighted average of at least the most recent 20 short run default rates calculated according to Article 4(1). If the available short run default rates span a longer period and they are relevant, the short run default rates for that longer p…
− 2. The long run default rate shall be calculated as the weighted average of at least the most recent 20 short run default rates calculated according to Article 4(1). If the available short run default rates span a longer period and they are relevant, the short run default rates for that longer perio…
+ **3.** For the purpose of producing the weighted average referred to in paragraph 2, the short run default rates calculated according to Article 4 shall include the most recent recessionary period. This recessionary period shall span a semester or more of the negative growth rates of the Gross Domes…
− 3. For the purpose of producing the weighted average referred to in paragraph 2, the short run default rates calculated according to Article 4 shall include the most recent recessionary period. This recessionary period shall span a semester or more of the negative growth rates of the Gross Domestic …
+ **4.** For the purpose of producing the weighted average referred to in paragraph 2, the following shall apply:(a) the short run default rates calculated according to Article 4(1) shall be weighted based on the number of items specified in point (a) of Article 4(2);(b) the estimated short run defaul…
− 4. For the purpose of producing the weighted average referred to in paragraph 2, the following shall apply:
− 
− (a) the short run default rates calculated according to Article 4(1) shall be weighted based on the number of items specified in point (a) of Article 4(2);
− (b) the estimated short run default rates shall be weighted based on estimates of the number of items assigned the same rating category present at the beginning of the time horizon.
− 
− 
− ## Section 2 / **Calculation of the quantitative factors of a rating category where a sufficient number of credit ratings is not available**
− ## *CHAPTER 2* / ***Qualitative factors***
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+ **1.** The meaning of a rating category established by the ECAI shall be set according to the characteristics of the capacity of financial commitments as reflected in the items assigned such rating category being honoured, and more in particular by its degree of sensitivity to the economic environme…
− 1. The meaning of a rating category established by the ECAI shall be set according to the characteristics of the capacity of financial commitments as reflected in the items assigned such rating category being honoured, and more in particular by its degree of sensitivity to the economic environment a…
+ **2.** The meaning of a rating category shall be compared to the one established for each credit quality step, as set out in Article 15.
− 2. The meaning of a rating category shall be compared to the one established for each credit quality step, as set out in Article 15.
+ **3.** The meaning of a rating category shall be considered in combination with its relative position within the rating scale established by the ECAI.
− 3. The meaning of a rating category shall be considered in combination with its relative position within the rating scale established by the ECAI.
+ **1.** The creditworthiness of items assigned the same rating category shall be determined by considering at least their size and the degree of sector and geographical diversification of their business activity.
− 1. The creditworthiness of items assigned the same rating category shall be determined by considering at least their size and the degree of sector and geographical diversification of their business activity.
+ **2.** Different measures of creditworthiness assigned to items of the same rating category may be used, to the extent appropriate, to complement the information provided by the quantitative factors referred to in Article 1 where they are reliable and relevant for the mapping.
− 2. Different measures of creditworthiness assigned to items of the same rating category may be used, to the extent appropriate, to complement the information provided by the quantitative factors referred to in Article 1 where they are reliable and relevant for the mapping.
− ## *CHAPTER 3* / ***Benchmark and related references***
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− ## TITLE II / **MAPPING TABLES**
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− ## TITLE III / **FINAL PROVISION**
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− 
− This Regulation shall be binding in its entirety and directly applicable in all Member States.
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− ### ANNEX I
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− **Benchmarks for the purposes of Article 14**
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− *Table 1*
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− **Long-run benchmark**
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− **(3-year time horizon)**
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− | Credit Quality Step | Long run benchmark |  |  |
− | --- | --- | --- | --- |
− | Mid value | Lower bound | Upper bound |  |
− | 1 | 0,10 % | 0,00 % | 0,16 % |
− | 2 | 0,25 % | 0,17 % | 0,54 % |
− | 3 | 1,00 % | 0,55 % | 2,39 % |
− | 4 | 7,50 % | 2,40 % | 10,99 % |
− | 5 | 20,00 % | 11,00 % | 26,49 % |
− | 6 | 34,00 % | 26,50 % | 100,00 % |
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− *Table 2*
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− **Short run benchmarks**
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− **(3-year time horizon)**
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− | Credit Quality Step | Short run benchmarks |  |
− | --- | --- | --- |
− | Monitoring level | Trigger level |  |
− | 1 | 0,80 % | 1,20 % |
− | 2 | 1,00 % | 1,30 % |
− | 3 | 2,40 % | 3,00 % |
− | 4 | 11,00 % | 12,40 % |
− | 5 | 28,60 % | 35,00 % |
− | 6 | not applicable | not applicable |
− 
− ### ANNEX II
− 
− **Reference meaning of the rating category per credit quality step for the purposes of Article 15**
− 
− | Credit Quality Step | Meaning of the rating category |
− | --- | --- |
− | 1 | The rated entity has extremely/very strong capacity to meet its financial commitments and is subject to minimal/very low credit risk. |
− | 2 | The rated entity has strong capacity to meet its financial commitments and is subject to low credit risk but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than rated entities in CQS 1. |
− | 3 | The rated entity has adequate capacity to meet its financial commitments and is subject to moderate credit risk.However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the rated entity to meet its financial commitments. |
− | 4 | The rated entity has the capacity to meet its financial commitments but is subject to substantial credit risk.It faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions, which could lead to the rated entity's inadequate capacity to meet its financi…
− | 5 | The rated entity has the capacity to meet its financial commitments but is subject to high credit risk.Adverse business, financial, or economic conditions will likely impair the rated entity's capacity or willingness to meet its financial commitments. |
− | 6 | The rated entity is currently vulnerable or highly vulnerable and is subject to very high credit risk, including in or very near to default.It is dependent upon favourable business, financial, and economic conditions to meet its financial commitments. |
− 
− ### ANNEX III
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− 
− 
− ### **Mapping tables for the purposes of Article 16**
− 
− | Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
− | --- | --- | --- | --- | --- | --- | --- |
− | *ACRA Europe, a.s (formerly European Rating Agency, a.s.)* |  |  |  |  |  |  |
− | Global long-term rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Global short-term rating scale | S1 |  | S2 | S3, S4, NS |  |  |
− | *AM Best Europe Rating Services* |  |  |  |  |  |  |
− | Long-term issuer credit rating scale | aaa, aa+, aa, aa- | a+, a, a- | bbb+, bbb, bbb- | bb+, bb, bb- | b+, b, b- | ccc+, ccc, ccc-, cc, c, d, e, f, s |
− | Long-term issue rating scale | aaa, aa+, aa, aa- | a+, a, a- | bbb+, bbb, bbb- | bb+, bb, bb- | b+, b, b- | ccc+, ccc, ccc-, cc, c, d, s |
− | Financial strength rating scale | A++, A+ | A, A- | B++, B+ | B, B- | C++, C+ | C, C-, D, E, F, S |
− | Short-term issuer rating scale | AMB-1+ | AMB-1- | AMB-2,AMB-3 | AMB- 4, d, e, f, s |  |  |
− | Short-term issue rating scale | AMB-1+ | AMB-1- | AMB-2,AMB-3 | AMB- 4, d, s |  |  |
− | *ARC Ratings S.A.* |  |  |  |  |  |  |
− | Medium- and long-term issuer rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Medium- and long-term issue rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Short-term issuer rating scale | A-1+ | A-1 | A-2, A-3 | B, C, D |  |  |
− | Short-term issue rating scale | A-1+ | A-1 | A-2, A-3 | B, C, D |  |  |
− | *ASSEKURATA Assekuranz Rating-Agentur GmbH* |  |  |  |  |  |  |
− | Long-term credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC/C, D |
− | Short-term corporate rating scale | A++ | A |  | B, C, D |  |  |
− | *Axesor Risk Management SL* |  |  |  |  |  |  |
− | Global rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D, E |
− | *Banque de France* |  |  |  |  |  |  |
− | Global long-term issuer credit rating scale | 3++ | 3+, 3 | 4+ | 4, 5+ | 5, 6 | 7, 8, 9, P |
− | *BCRA — Credit Rating Agency AD* |  |  |  |  |  |  |
− | Global long-term rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Global short-term rating scale | A-1+ | A-1 | A-2, A-3 | B, C, D |  |  |
− | Pension-insurance company long-term scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Pension-insurance company short-term scale | A-1+ | A-1 | A-2, A-3 | B, C, D |  |  |
− | Pension fund long-term scale | AAA pf, AA pf | A pf | BBB pf | BB pf | B pf | C pf |
− | Guarantee fund long-term scale | AAA, AA | A | BBB | BB | B | C, D |
− | Guarantee fund short-term scale | A-1+ | A-1 | A-2, A-3 | B, C, D |  |  |
− | *Capital Intelligence Ratings Ltd* |  |  |  |  |  |  |
− | International long-term issuer rating scale | AAA, AA | A | BBB | BB | B | C, RS, SD, D |
− | International long-term issue rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | International long-term insurer financial strength rating scale | AAA, AA | A | BBB | BB | B | C, RS, SD, D |
− | International short-term issuer rating scale | A1+ | A1 | A2, A3 | B, C, RS, SD, D |  |  |
− | International short-term issue rating scale | A1+ | A1 | A2, A3 | B, C, D |  |  |
− | International short-term insurer financial strength rating scale | A1+ | A1 | A2, A3 | B, C, RS, SD, D |  |  |
− | *Cerved Rating Agency S.p.A.* |  |  |  |  |  |  |
− | Corporate long-term rating scale | A1.1, A1.2, A1.3 | A2.1, A2.2, A3.1 | B1.1, B1.2 | B2.1, B2.2 | C1.1 | C1.2, C2.1 |
− | *Creditreform Rating AG* |  |  |  |  |  |  |
− | Long-term issuer rating scale | AAA, AA | A |  | BBB | BB | B, C, SD, D |
− | Long-term issue rating scale | AAA, AA | A |  | BBB | BB | B, C, D |
− | Short-term rating scale | L1 | L2 |  | L3, NEL, D |  |  |
− | *CRIF Ratings S.r.l.* |  |  |  |  |  |  |
− | Long-term issuer rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D1S, D |
− | Long-term issue rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, DS |
− | Short-term issuer rating scale | IG-1 |  | IG-2 | SIG-1, SIG-2, SIG-3, SIG-4 |  |  |
− | Short-term issue rating scale | IG-1 |  | IG-2 | SIG-1, SIG-2, SIG-3, SIG-4 |  |  |
− | *Dagong Europe Credit Rating Srl* |  |  |  |  |  |  |
− | Long-term credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Short-term credit rating scale | A-1 |  | A-2, A-3 | B, C, D |  |  |
− | *DBRS Ratings* |  |  |  |  |  |  |
− | Long-term obligations rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Commercial paper and short-term debt rating scale | R-1 H, R-1 M | R-1 L | R-2, R-3 | R-4, R-5, D |  |  |
− | Financial strength rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, R |
− | *Egan-Jones Ratings Co.* |  |  |  |  |  |  |
− | Long-term credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Short-term credit rating scale | A-1+ | A-1 | A-2 | A-3, B, C, D |  |  |
− | *Euler Hermes Rating GmbH* |  |  |  |  |  |  |
− | Global long-term rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, SD, D |
− | *EuroRating Sp. z o.o.* |  |  |  |  |  |  |
− | Global long-term rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | *Fitch Ratings* |  |  |  |  |  |  |
− | Long-term issuer default rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, RD, D |
− | Corporate finance obligations — long-term rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C |
− | Long-term international Insurer Financial Strength rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C |
− | Derivative counterparty rating scale | AAA dcr, AA dcr | A dcr | BBB dcr | BB dcr | B dcr | CCC dcr, CC dcr, C dcr |
− | Short-term rating scale | F1+ | F1 | F2, F3 | B, C, RD, D |  |  |
− | Short-term IFS rating scale | F1+ | F1 | F2, F3 | B, C |  |  |
− | *GBB-Rating Gesellschaft für Bonitätsbeurteilung GmbH* |  |  |  |  |  |  |
− | Global long-term rating scale | AAA, AA |  | A, BBB | BB | B | CCC, CC, C, D |
− | *HR Ratings de México, S.A. de C.V.* |  |  |  |  |  |  |
− | Global long-term rating scale | HR AAA(G)/HR AA(G) | HR A(G) | HR BBB(G) | HR BB(G) | HR B(G) | HR C(G)/HR D(G) |
− | Global short-term rating scale | HR+1(G)/HR1(G) | HR2(G) | HR3(G) | HR4(G), HR5(G), HR D(G) |  |  |
− | *ICAP Group S.A* |  |  |  |  |  |  |
− | Global long-term rating scale |  | AA, A | BB, B | C, D | E, F | G, H |
− | *INC Rating Sp. z o.o.* |  |  |  |  |  |  |
− | Long-term issuer credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | *Japan Credit Rating Agency Ltd* |  |  |  |  |  |  |
− | Long-term issuer rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, LD, D |
− | Long-term issue rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Short-term issuer rating scale | J-1+ | J-1 | J-2 | J-3, NJ, LD, D |  |  |
− | Short-term issue credit rating scale | J-1+ | J-1 | J-2 | J-3, NJ, D |  |  |
− | *Kroll Bond Rating Agency* |  |  |  |  |  |  |
− | Long-term credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Short-term credit rating scale | K1+ | K1 | K2, K3 | B, C, D |  |  |
− | *Kroll Bond Rating Agency Europe* |  |  |  |  |  |  |
− | Long-term credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Short-term credit rating scale | K1+ | K1 | K2, K3 | B, C, D |  |  |
− | *modeFinance S.r.l.* |  |  |  |  |  |  |
− | Global long-term rating scale | A1, A2 | A3 | B1 | B2 | B3 | C1, C2, C3, D |
− | *Moody’s Investors Service* |  |  |  |  |  |  |
− | Global long-term rating scale | Aaa, Aa | A | Baa | Ba | B | Caa, Ca, C |
− | Global short-term rating scale | P-1 | P-2 | P-3 | NP |  |  |
− | *QIVALIO SAS (formerly Spread Research)* |  |  |  |  |  |  |
− | Global long-term rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Global short-term rating scale | SR0 |  | SR1, SR2 | SR3, SR4, SR5, SRD |  |  |
− | *Rating-Agentur Expert RA GmbH* |  |  |  |  |  |  |
− | International credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D, E |
− | International reliability rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D, E |
− | *Scope Ratings GmbH* |  |  |  |  |  |  |
− | Long-term rating scale | AAA, AA | A | BBB | BB | B | CCC, CC,C, D |
− | Short-term rating scale | S-1+ | S-1 | S-2 | S-3, S-4 |  |  |
− | *S&P Global Ratings Europe Limited* |  |  |  |  |  |  |
− | Long-term issuer credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, R, SD/D |
− | Long-term issue credit rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |
− | Insurer financial strength rating scale | AAA, AA | A | BBB | BB | B | CCC, CC, SD/D, R |
− | Mid-Market Evaluation rating scale |  | MM1 | MM2 | MM3, MM4 | MM5, MM6 | MM7, MM8, MMD |
− | Short-term issuer credit rating scale | A-1+ | A-1 | A-2, A-3 | B, C, R, SD/D |  |  |
− | Short-term issue credit rating scale | A-1+ | A-1 | A-2, A-3 | B, C, D |  |  |
− | *The Economist Intelligence Unit Ltd* |  |  |  |  |  |  |
− | Sovereign rating band scale | AAA, AA | A | BBB | BB | B | CCC, CC, C, D |