EXPLANATORY MEMORANDUM

1.CONTEXT OF THE DELEGATED ACT

The European Securities and Markets Authority (ESMA) has a complex fee funding system based on several legal bases in sectoral legislation. There are currently seven delegated acts laying down the calculation and payment modalities of the fees charged to the different types of entities under ESMA’s direct supervision 1 .

Article 19(1) of the CRA Regulation 2 provides that ESMA shall charge fees to credit rating agencies (CRAs) which cover ESMA’s costs relating to the registration, certification and supervision of CRAs. These fees also allow ESMA to reimburse national competent authorities for any costs they incur in carrying out work under the CRA Regulation on ESMA’s behalf.

Article 19(2) of the CRA Regulation requires the Commission to adopt a Delegated Regulation on supervisory fees to determine the different types of fees payable, the amount of fees payable, the modalities of payment and the reimbursement of fees to national competent authorities. The key principle to be reflected in the Delegated Regulation is set out in the second part of Article 19(2) which states that:

The amount of a fee charged to a credit rating agency shall cover all administrative costs and be proportionate to the turnover of the credit rating agency concerned.

Commission Delegated Regulation 272/2012 with regard to the fees charged by ESMA to Credit Rating Agencies (the Fees Delegated Regulation) 3 entered into force on 31 March 2012. The Fees Delegated Regulation sought to ensure a fair and clear allocation of fees which reflected ESMA’s administrative and supervisory costs whilst not being unduly burdensome for new market entrants. In order to achieve this, the Fees Delegated Regulation based the calculation of supervisory fees on CRAs’ turnover from credit ratings and ancillary services.

In its 2018 review, the Internal Audit Service of the European Commission (IAS) concluded that the lack of harmonisation between the Delegated Regulations resulted in unnecessary complexity and meant that ESMA’s resources were not being used as efficiently or effectively as possible. In the same year, the European Court of Auditors observed that the complexity of ESMA’s fee funding system creates risks for the correct calculation of fees. 4

Following these observations, the Commission asked ESMA for technical advice on harmonisation and simplification of delegated acts on fees charged by ESMA. ESMA delivered two pieces of technical advice on fees charged to CRAs on 21 June 2021 5 and on fees charged to trade repositories under the European Market Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation (SFTR) on 8 July 2021 6 with the aim to facilitate consistency and harmonisation across all delegated regulations on fees charged by ESMA.

Based on the recommendations from the Internal Audit Service, the European Court of Auditors and the technical advice provided by ESMA, the Commission aims to align technical aspects of the fee collection process across ESMA’s supervisory mandates. This requires amending five out of seven delegated regulations. The delegated regulations on central counterparties 7 and on data reporting service providers 8 will not be included in this exercise as they already converge on the main relevant aspects. The amendments to the delegated regulation 272/2012, together with four other delegated acts on fees charged by ESMA 9 , will ensure consistency with regard to the notion of applicable turnover, payment modalities and the general budgetary approach and thus reduce the complexity of ESMA’s fees management.

2.CONSULTATIONS PRIOR TO THE ADOPTION OF THE ACT

To seek feedback on the proposals for inclusion in the Technical Advice, the ESMA held a Public Consultation between 29 January and 15 March 2021.

In addition, on 21 September 2023, the Commission presented to the Expert Group of the European Securities Committee (E02553) at its meeting the initiative to ensure consistency of technical aspects in delegated acts on fees charged by ESMA to directly supervised entities. The expert group supported the Commission’s approach.

The draft Delegated Regulation was published on the Better Regulation portal for a four-week feedback period from XXXX to XXXX, in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making. X comments were received on supervisory measures.

3.LEGAL ELEMENTS OF THE DELEGATED ACT

This amending delegated regulation aligns several elements of the fees to be paid by credit rating agencies to ESMA with corresponding rules in other areas in which ESMA charges fees. The following amendments are introduced:

Article 2 is amended to specify that the fees should fully cover the costs, direct and indirect, of the supervisory activities.

Recital 2 and Article 5(2)(a) and (b) are amended to clarify that supervisory fees charged to CRAs are determined in accordance with the ESMA budgeting procedure and setting at a level which avoids any significant and recurrent accumulation of deficit or surplus.

Article 3 is amended to include a common notion of ‘applicable turnover’ based on audited revenues from both core and ancillary services Moreover, it should refer to accounts from year n-2 that would ensure the timely submission of the audited accounts (30 September of year n-1), so that the ESMA can calculate the fees, while also ensuring that the calculation of the proportion of the entities’ specific turnover to the total turnover is in principle based on the same financial year.

In addition, it should be reflected that, where a credit rating agency submits the audited accounts in a currency other than the Euro, ESMA will converts the figures by using the average EUR rate applied by the European Central Bank for the period covered by the accounts.

Article 4(3) is amended to introduce a reference to the default interest rate laid down in Article 99 of Regulation (EU, Euratom) 2018/1046 in case of late payment of fees.

Article 5(3) and Article 7(2) are amended to harmonise the payment modalities, so that payment of supervisory fees is done in one instalment to be paid by the end of the first quarter of the year.

Article 6(7) and Article 8(3) are amended to established that no registration or certification fees will be reimbursed in case of withdrawal of an application for registration or certification.

Article 6(8) is amended to align the approach with regard to the payment of fees in the first year of registration establishing a payment of an initial supervisory fee which equals the registration fee paid, pro-rated from the date of registration to the end of the year of registration. Where a credit rating agency is registered during the month of December, no initial supervisory fee should be payable.

Article 8(4) is amended to exempt certified credit rating agencies from the payment of supervisory fees in the year during which their certification takes effect. Thus, Annual fees will become payable by all certified CRAs in the year following their certification by ESMA.

COMMISSION DELEGATED REGULATION (EU) …/...

of XXX

amending Delegated Regulation (EU) No 272/2012 as regards harmonisation of certain aspects linked to fees charged by the European Securities and Markets Authority to credit rating agencies supplementing Regulation (EC) No 1060/2009 of the European Parliament and of the Council

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EC) 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies 10 , and in particular Article 19(2) thereof,

Whereas:

(1)Commission Delegated Regulation (EU) No 272/2012 11 specifies the type of fees, the calculation, and the payment modalities with regard to the fees charged by the European Securities and Markets Authority (ESMA) to the credit rating agencies.

(2)In 2018, both the Commission’s Internal Audit Service’s review and the European Court of Auditors’ audit have concluded that ESMA’s fee funding system is unnecessarily complex. To simplify the collection of fees and reduce risks linked to the incorrect calculation or inefficient allocation of fees, it is necessary to ensure consistency of technical aspects across the different delegated acts on fees charged by ESMA to directly supervised entities.

(3)To fully cover ESMA’s expenditures relating to the supervision of credit rating agencies, the annual supervisory fees should be determined on the basis of the annual estimate of all direct costs necessary for the supervisory tasks performed by ESMA and a reasonable apportionment of the Authority’s fixed and variable overheads. 

(4)To ensure consistency among delegated acts on fees paid to ESMA, and to enable ESMA to dispose in due time of audited turnover data for the estimation of fees due by credit rating agencies to ESMA, the reference year of the audited accounts for the determination of the applicable turnover should be 2 years prior to the year for which ESMA charges fees to the credit rating agency.

(5)ESMA should be able to establish its annual budget in time, based on certified turnover data. To facilitate the calculation of the fees by ESMA, credit rating agencies should submit audited accounts with breakdowns of core and ancillary services. A deadline should be set by which credit rating agencies are to submit to ESMA their audited accounts.

(6)The applicable turnover of credit rating agencies is calculated in euros. It is therefore necessary to specify a mechanism for the conversion into euros of revenues generated in other currencies.

(7)In order to ensure consistency with other delegated acts on fees charged by ESMA, ESMA should calculate the penalty in case of late payments in line with the provisions on default interest set out in Article 99 of the of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council 12 .

(8)In line with Commission Delegated Regulation (EU) 2019/715 13 , fees charged to credit rating agencies should be set at a level that ensures that the full cost of services provided by ESMA is covered and a deficit is avoided, but at the same time avoids the accumulation of a significant surplus. Where a significant positive or negative budget result becomes recurrent, the level of the fees shall be revised. 

(9)To further simplify the fee management, and to ensure ESMA has the necessary funds to carry out its planned supervisory activities, annual supervisory fees should be paid in a single instalment during the first 3 months of the calendar year for which such fees are due. They should not be reimbursed.

(10)The registration fee is meant to cover the costs incurred by ESMA to investigate whether the credit rating agency concerned fulfils all conditions. When an applicant credit rating agency withdraws its application, ESMA will have made costs and is under no obligation to refund fees related to such.

(11)To avoid an excessive supervisory fee in the year of its registration, a registered credit rating agency should pay an initial supervisory fee the amount of which should be proportional to the period of time in that first year during which the credit rating agency has been registered.

(12)The administrative cost linked to the first year supervisory fee for a credit rating agency registered in December, is not proportionate to the fee itself. Therefore, a credit rating agency that is registered in December should be exempted from the requirement to pay an annual supervisory fee for the year in which that credit rating agency was registered.

(13)To simplify the payment of certification fees, 50% of the fee should be refunded in case a credit rating agency withdraws its application before ESMA notified the completeness of the application. If a credit rating agency withdraws its application after ESMA has notified the credit rating agency that the application is complete the certification fee should not be refunded. Certified credit rating agencies should not pay an annual supervisory fee according to Article 7(1) in the first year of certification.

(14)Delegated Regulation (EU) No 272/2012 should therefore be amended accordingly,

HAS ADOPTED THIS REGULATION:

Article 1

Amendments to Delegated Regulation (EU) No 272/2012

Delegated Regulation (EU) No 272/2012 is amended as follows:

(1)Article 2 is replaced by the following:

‘Article 2

Recovery of supervisory costs in full

The fees charged to credit rating agencies shall cover:

(a)    all direct and indirect costs relating to the supervision of credit rating agencies by ESMA in accordance with Regulation (EC) No 1060/2009, including costs resulting from the registration and certification of credit rating agencies;

(b)    all costs for the reimbursement of direct and indirect costs of competent authorities to which ESMA has delegated tasks in accordance with Article 30 of Regulation (EC) No 1060/2009;

(c)    all costs for the reimbursement of direct and indirect costs of competent authorities that have provided assistance to ESMA in accordance to Article 23c(4) and Article 23d(5) of Regulation (EC) No 1060/2009.’

(2)Article 3 is replaced by the following:

‘Article 3

Applicable turnover

1.    For the purposes of calculating the fees referred to in Article 5, Article 7(1) and Article 11(1) and (2), the applicable turnover for a given financial year (n) shall be the revenues of a credit rating agency as published in its audited accounts of the year n-2 generated from rating activities and ancillary services.

2.    Where the credit rating agency did not operate during the full year (n-2), the applicable revenue shall be estimated by extrapolating that amount for the whole financial year. 

3.    Credit rating agencies shall provide ESMA, on an annual basis, with audited accounts as referred to in paragraph 1. Those accounts shall distinguish between revenues generated from rating activities and ancillary services and shall be submitted to ESMA by electronic means by 30 September each year (n - 1).

4.    Where the revenues referred to in paragraph 1 are reported in another currency than euro, ESMA shall convert those revenues into euro using the average euro foreign exchange rate applicable to the period during which those revenues were recorded. For that purpose, ESMA shall use the euro foreign exchange reference rate published by the European Central Bank.’;

(3)in Article 4, paragraph 3the second subparagraph is replaced by the following:

‘Any late payment shall incur the default interest laid down in Article 99 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council*.

___________

*    Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30.7.2018, p. 1, ELI: http://data.europa.eu/eli/reg/2018/1046/oj).’;

(4)Article 5 is amended as follows:

(a)in paragraph 2, point (b) is replaced by the following:

‘(b)    the relevant amount for the calculation of the annual supervisory fee for a given financial year shall be the estimate of expenditure referred to in point (a) reduced by the annual supervisory fees referred to in Article 7;’;

(b)    paragraph 3 is replaced by the following:

‘3.    The annual supervisory fee shall be paid in a single instalment, which shall be due by no later than the end of March of the year to which it relates.

ESMA shall send debit notes to the credit rating agencies concerned specifying the amount of the annual supervisory fee at least 30 calendar days before the day when annual fees are to be paid.

The annual supervisory fee shall not be reimbursed.’;

(5)in Article 6, paragraphs 7 and 8 are replaced by the following:

‘7.    ESMA shall not reimburse a paid registration fee where a credit rating agency withdraws its application for registration before ESMA has adopted the reasoned decision to register or refuse registration.

8.    By way of derogation from Article 5, a registered credit rating agency that is required to pay an annual supervisory fee in accordance with Article 5(1) shall pay in the year of its registration an initial supervisory fee which is calculated as follows:

registered credit rating agency first-year fee = (Registration fee * Coefficient)

Coefficient =

Credit rating agencies shall pay the supervisory fee of the first year after they have been notified by ESMA that their registration is successful and within 30 days from the date of issuance of ESMA’s debit note.

However, where a credit rating agency is registered during the month of December, that credit rating agency shall not be required to pay an annual supervisory fee for the year in which it was registered.’;

(6)in Article 7, paragraph 2 is replaced by the following:

’2.    The annual supervisory fee for a certified credit rating agency shall be due by the end of March of the year to which it relates. ESMA shall send an invoice specifying the amount of the annual supervisory fee to a certified credit rating agency at least 30 days before that date, .’;

(7)in Article 8, paragraphs 3 and 4 are replaced by the following:

‘3.    Where a credit rating agency withdraws its application for certification before ESMA has notified that agency, in accordance with Article 15(4), second subparagraph, of Regulation (EC) No 1060/2009; that the application is complete, ESMA shall reimburse half of the certification fee. Where the application is withdrawn after that date, but before ESMA adopts the reasoned decision to certify or refuse certification, ESMA shall not reimburse the certification fee.

4.    By way of derogation from Article 7, a certified credit rating agency that is required to pay an annual supervisory fee pursuant to Article 7(1) shall be exempted from the payment of supervisory fees in the year during which its certification takes effect.

The annual supervisory fee shall become payable by the certified credit rating agency in the year following its certification by ESMA in accordance with Article 7.’.

Article 2

Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,