Beware the shadow (rating)

ESMA fived five banks on Monday for issuing credit ratings without being authorised under the CRA Regulation.  Danske, Nordea, SEB, Svenska and Swedbank had been issuing credit research to clients which included their opinion (“shadow ratings”) of various entities and debt obligations (one example from Danske: “We maintain our BUY recommendation, viewing the group as a A- rated company“). The CRAR definition of “credit rating” is “an opinion regarding … creditworthiness …issued using an established and defined system of rating categories”, and “rating category” is defined as a rating symbol, such as a letter or numerical symbol”.  Article 3(2) expressly permits giving investment research and advice, and opinions about value, but these banks had gone too far.