ESMA warns CRAs and TRs to prepare for a no-deal Brexit

Nov 10 2018

The European Securities and Markets Authority (ESMA) issued a Public Statement in order to raise market participants’ awareness on the readiness of credit rating agencies (CRAs) and trade repositories (TRs) for the possibility of no agreement being reached in the context of the United Kingdom (UK) withdrawing from the European Union (EU).

As there is no assurance that a transition period will be agreed, entities using services provided by CRAs and TRs need to consider the scenario where a no-deal Brexit would take place on 30 March 2019.

Derivatives subject to the reporting obligation under EMIR1 must be reported to a registered EU-established TR or a recognised third-country TR2. Similarly, CRAs need to have a legal entity registered in the EU and supervised by ESMA, in order for their ratings to be used for regulatory purposes in the EU. In a no-deal Brexit scenario, TRs and CRAs established in the UK will lose their EU registration as of the UK’s withdrawal date.

UK-based CRAs and TRs currently registered with ESMA have implemented contingency plans in preparation of a no-deal Brexit scenario. ESMA has noted significant steps forward by both industry sectors in terms of preparedness, however, some actions still need to be completed.

ESMA is engaging on a continuous basis with the relevant supervised entities to ensure that the agreed Brexit contingency plans are fully executed by March 2019 in case of no- deal Brexit, including the finalisation of pending applications for registration. ESMA is currently assessing a number of CRAs and TRs applications, submitted as part of the firms’ Brexit contingency plans.

ESMA emphasises that a positive decision on a registration application ultimately depends on the completeness and the quality of the application file and on the applicant’s compliance with the relevant regulations.

EU counterparties and CCPs must report details of derivative contracts to a registered EU- established TR or a recognised third-country TR. All counterparties must ensure that this requirement continues to be fulfilled. ESMA invites market participants to contact their TR to verify whether continuity of service will be ensured after Brexit.

In general, ESMA emphasises the importance for market participants to monitor closely the public disclosures made by CRAs and TRs in the context of Brexit.


ESMA: Contingency plans of Credit Rating Agencies and Trade Repositories in the context of the United Kingdom withdrawing from the European Union (PDF)



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