COB 8.7 COB 8.7 Transparency and disclosure
Policies and procedures
COB 8.7.1 COB 8.7.1(1) A
Credit Rating Agencymust, subject to (2), have adequate policies, procedures and controls to ensure that it discloses in a timely manner:(a) its Credit Ratingsand any updates thereof;(b) its policies for distributing Credit Ratingsand updates thereof;(c) the methodologies and models used and key assumptions made in preparing its Credit Ratingsand any updates thereof; and(d) any other significant element relating to (a), (b) or (c) above.(2) A Credit Rating Agencyis not required to disclose information where the information is subject to confidentiality requirements.
COB 8.7.1 Guidance1. The level of detail required in the disclosure of information concerning methodologies, models and key assumptions should be such as to give adequate information to the users of
Credit Ratingsto enable them to perform their own due diligence when assessing whether, or to what extent, reliance can be placed on those Credit Ratings(see COB Rule 8.8.1). Disclosure of information must not, however, reveal confidential information of, or relating to, the Rating Subjector its Grouppursuant to COB Rule 22.214.171.124. The information referred to in Guidance No. 1 should generally include the meaning of each rating category and the definition of default or recovery, and the time horizon the Credit Rating Agencyused when making a Credit Rating.3. A Credit Rating Agencyshould adequately and clearly disclose applicable risks which may affect a Credit Rating, including a sensitivity analysis of the relevant assumptions and an explanation of how various market developments affect the parameters built into the methodologies and models and may influence or impinge on the Credit Rating(for example volatility).4. If the nature of a Credit Ratingor other circumstances make a historical default rate inappropriate or otherwise likely to mislead investors, the Credit Rating Agencyshould provide appropriate clarifications.5. A Credit Rating Agencyshould provide information to assist users of its Credit Ratingsto develop a greater understanding of what a Credit Ratingis, and the limitations on the use of Credit Ratingswith respect to the particular type of financial product that the Credit Rating Agencyrates. A Credit Rating Agencyshould clearly indicate the attributes and limitations of each Credit Rating, and the limits to which the firm verifies information provided to it by the Rating Subject, its Related Partyor any external source.
Communication of information
COB 8.7.2 COB 8.7.2
Credit Rating Agencymust ensure that its communications relating to its Credit Ratings, Credit Rating Activitiesand its other business are clear, fair and not misleading.
COB 8.7.2 Guidance1. A
Credit Rating Agencyshould, taking into account the nature, scale and complexity of its operations, have a function within its organisation charged with the responsibility for communicating with market participants and the public on questions, concerns or complaints it receives.2. The objective of this function should be to help ensure that the Credit Rating Agency'sofficers and management are informed of those issues that such officers and management would reasonably need to be informed about when setting and implementing the Credit Rating Agency'ssystems and controls.