On 22 October 2012 the European Commission requested ESMA to provide its technical advice on the equivalence between the legal and supervisory framework of Argentina, Brazil, Hong Kong, Mexico, Singapore with the EU regulatory regime for credit rating agencies. (Regulation (EC) No. 1060/2009 of the European Parliament and the Council on credit rating agencies1).

On 9 October 2012, the European Commission published an equivalence decision on US, Canada and Australia. The same decision has been taken on 28 October 2010 on Japan.

With regard to the compliance with the EU requirements on endorsement, ESMA had alreadyindicated that it considers the legal and regulatory regime for CRAs supervision of the following countries as “as stringent as” the EU requirements:

• on 15 March 2012, Hong Kong and Singapore;
• on 18 April 2012, Argentina and Mexico;
• on 27 April 2012, Brazil.

This report sets out ESMA’s advice to the European Commission in respect of the equivalence between the Argentina (Part I), Brazil (Part II), Mexico (Part III), Hong Kong (Part IV) and Singapore (Part IV), respective legal and supervisory frameworks and the EU regulatory regime for credit rating agencies.

The equivalence assessment conducted by ESMA follows an objective-based approach, where the capability of the regime in the third country to meet the objectives of the EU Regulation is assessed
from a holistic perspective.

With regard to Argentina, Brazil, Mexico, Hong Kong, Singapore, following ESMA’s decision to consider their regulatory regimes as being in line with the requirements defined in Article 4(3) of the EU Regulation on CRA (1060/2009), the following assessments conclude that their legal and supervisory framework for credit rating agencies are equivalent to the EU regulatory regime for credit rating agencies.

A positive equivalence determination is required to enable a third country credit rating agency to apply for certification. However, ESMA reiterates that a determination of equivalence is one of the criteria that have to be met as set out in Article 5(1) of the EU Regulation. Other relevant requirements include the authorisation or registration of the CRA and its supervision in that third country. A positive equivalence determination should not be understood as meaning that a third country credit rating agency will automatically be granted certification and as such its credit ratings issued from such a third country may be used in the EU for regulatory purposes.