Risk Management: Credit Rating Agencies

This will be of particular interest to those firms responsible for the management of AIFs and UCITS (and occupational retirement schemes – IORPS – that are subject to Directive 2003/41/EC).

To counteract a perceived over-reliance on credit ratings when investing in debt instruments, Directive 2013/14/EU will be applicable from 21 December 2014.

For a Directive it is pleasantly short – three pages – and has the effect of amending relevant Articles in UCITS IV (2009/65/EC: Article 51); AIFMD (2011/61/EU: Article 15); and IORPS (2003/41/EC: Article 18). In essence, when implementing risk-management measures it will not be permissible to “solely or mechanically” rely on credit ratings issued by credit rating agencies when assessing the creditworthiness of assets.

The Directive’s requirements will be incorporated into the Handbook by way of an amendment to COLL 6.12.3 (UCITS) and to FUND 3.7.5 (AIFs). The amendments will simply transpose the relevant wordage in Directive 2013/14/EU – a link is provided to assist firms.

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