ESMA asks clients of credit rating agencies and trade repositories to prepare for a no-deal Brexit

On 9 November 2018, the European Securities and Markets Authority (ESMA) issued a public statement in order to raise market participants’ awareness on the readiness of credit rating agencies (CRAs) and trade repositories (TRs) for the possibility of no agreement being reached in the context of the United Kingdom (UK) withdrawing from the European Union (EU).

As there is no assurance that a transition period will be agreed, entities using services provided by CRAs and TRs need to consider the scenario where a no-deal Brexit would take place on 30 March 2019. Derivatives subject to the reporting obligation under the European Market Infrastructure Regulation (EMIR) must be reported to a registered EU-established TR or a recognised third-country TR.

Similarly, CRAs need to have a legal entity registered in the EU and supervised by ESMA, in order for their ratings to be used for regulatory purposes in the EU. In a no-deal Brexit scenario, TRs and CRAs established in the UK will lose their EU registration as of the UK’s withdrawal date.