The Eurosystem Credit Assessment Framework

Fulfilling the necessary criteria for ECAF is a real challenge for European agencies, first and foremost because those criteria put very high quantitative requirements regarding coverage and track record on the agencies. In it's current form the requirements can not be overcome by European agencies in the medium to long term without substantial upfront investments. To make things worse, for reasons of liquidity and access to central bank funding, other institutional investors often follow the ECB’s rating requirements. This makes market access for small European CRAs even more difficult. EU debt issuers, on the other hand, have over the years expressed a desire for a genuine European alternative to the Big Three – an alternative which goes beyond the rigid and mechanistic approach of the US-based CRAs and which offers value-based pricing as op-posed to oligopolistic price dictates.

Today, the European Commission, the European Parliament and the ECB all agree that the time is right to take a second look at European alternatives to the established oligopolists. Some CRAs in Europe have strongly expanded their business activities and now present themselves as viable alternatives to support the ECB’s market activities with a dedicated European view on credit risks. However, these CRAs are at the moment excluded from ECAF status and hence face unfair competition and barriers to market entry into a highly oligopolistic market.