Jurisdiction(s):
European Union

EU regulation and ESMA oversight of credit rating agency methodologies: CRA Regulation, Delegated Regulation 447/2012, ESG integration proposals, and CLO conflicts of interest

Published by a LexisNexis EU Law expert

Practice notes

What is a credit rating agency methodology?

A credit rating agency (CRA) methodology is the set of practices, procedures and rules a CRA applies when assigning or updating a credit rating.

CRAs issue three main types of ratings:

ratings of corporates
ratings of sovereigns
ratings of securities issued in a securitisation or similar transaction (structured securities) where a special purpose vehicle (SPV) holds a pool of underlying assets, and payments to holders of the structured securities depend on cash flows generated by those assets

A corporate or sovereign rating is typically derived from analysis of:

the creditworthiness of the entity before any external support
any external support that could be available to the entity if it encounters financial difficulties
the particular financial instruments being rated

A rating of structured securities is usually based on analysis of:

the credit quality of the underlying assets
legal and regulatory risks linked to the structure of the transaction
where, as is often the case, a number of separate series (or tranches) of securities have been

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Web page updated on 21/05/2026

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