Scope Ratings loses appeal against Esma over regulatory breach fine
German credit rating agency Scope Ratings has seen its €640,000 fine confirmed on Monday by the joint board of appeal of the European supervisory authorities, which has backed Esma’s decision from May 2020.
The European securities and markets authority had fined Scope Ratings following breaches of the Credit Rating Agencies Regulation (CRAR) in relation to the systematic application of the agency’s 2015 covered bonds methodology (CBM) and its revision. Scope Ratings had introduced material changes in its 2016 covered bonds methodology without consulting publicly stakeholders on these changes.
Thus, the BoA’s decision confirms that credit rating agencies shall “have in place methodologies that are systematic in their design and that are applied systematically” but also that divergences from methodologies “should be allowed only on narrow grounds.” The BoA’s said Esma had done well in adopting a case-by-case approach to the notion of ‘material change’ to a methodology and in linking this notion to whether or not there could have been a potential impact on a rating.
Scope Ratings can appeal the BoA’s decision before the Court of Justice of the European Union (CJEU) within two months. If it does not during that period, Esma’s decision will become final.