Art. 5a · Over-reliance on credit ratings by financial institutions

Version in force 20 June 2013, Inserted +848 −0§

Amended by Regulation (EU) No 462/2013 32013R0462 on EUR-Lex (external, EUR-Lex)

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A new Article 5a is added, requiring the entities referred to in the first subparagraph of Article 4(1) to make their own credit risk assessments and not rely solely or mechanistically on credit ratings when assessing the creditworthiness of an entity or financial instrument.

It also directs sectoral competent authorities supervising those entities to monitor the adequacy of their credit risk assessment processes, assess the use of contractual references to credit ratings, and, where appropriate, encourage mitigation of such references, taking into account the nature, scale and complexity of the entities' activities and in line with specific sectoral legislation.

Cited: Art. 5a, v2 (external, EUR-Lex)

v1 is the previous version, v2 this one.

Article 5a
Over-reliance on credit ratings by financial institutions
1. The entitites referred to in the first subparagraph of Article 4(1) shall make their own credit risk assessment and shall not solely or mechanistically rely on credit ratings for assessing the creditworthiness of an entity or financial instrument.
2. Sectoral competent authorities in charge of supervising the entities referred to in the first subparagraph of Article 4(1) shall, taking into account the nature, scale and complexity of their activities, monitor the adequacy of their credit risk assessment processes, assess the use of contractual references to credit ratings and, where appropriate, encourage them to mitigate the impact of such references, with a view to reducing sole and mechanistic reliance on credit ratings, in line with specific sectoral legislation.