Shrinking Dynamics in the European CRA Market: A Structural Squeeze

While the List of De-Registered or De-Certified CRAs, last updated 10 July 2024, reads like a litany of exits, the counterpart—a list of newly-authorised CRAs—has remained conspicuously static (esma.europa.eu). This imbalance underscores a broader structural challenge: entering the European CRA market has become increasingly difficult, even as several established players withdraw under regulatory pressure, strategic realignment, or consolidation.

ESMA’s Authorisation Regime: An Uphill Battle

1. Completeness Phase: Applicants must submit extensive documentation on business plans, governance, internal controls, methodologies, and compliance policies as per Commission Delegated Regulation 449/2012.
2. Compliance Phase: ESMA conducts a detailed review of whether the applicant meets all regulatory requirements. Standards are assessed using technical benchmarks—from Commission Delegated Regulation 447/2012—to evaluate rating methodologies against the CRA Regulation’s Article 8(3) (esma.europa.eu).

Furthermore, ESMA maintains a published list of registered or certified CRAs, updated within five working days of each registration or certification decision. However, despite these maintained lists, new entries have dwindled in recent years.

The Exit Roster: A Growing List

Simultaneously, the List of De-Registered or De-Certified CRAs continues to expand:

• Feri EuroRating Services (Germany) – De-registered 29 March 2017
• Beyond Ratings SAS (France) – De-registered July 2019
• Kroll Bond Rating Agency (USA) – De-certified December 2020
• Scope Hamburg GmbH (Germany) – De-registered March 2023
• EuroRating Sp. z o.o. (Poland) – De-registered June 2024
• Rating-Agentur Expert RA GmbH, Qivalio (France), and others also appear on this list of withdrawal (esma.europa.eu).

Why the Slowdown?

Several converging factors likely contribute to this stagnation:

• Regulatory Burden: The authorisation process demands high transparency, stringent governance structures, and robust methodologies. While intended to safeguard rating quality, these requirements also create high entry barriers.
• Costs and Complexity: Smaller or niche actors may lack the resources to endure months of preparatory work, external audits, and regulatory scrutiny required for ESMA approval.
• Dominance of Global Players: Established giants—such as Moody’s, S&P, Fitch, and DBRS—already command a massive share of the CRA market, limiting the practical market space available to new entrants.
• Withdrawal Trend: With multiple CRAs voluntarily exiting (often via notification under Article 20(1)(a) of the CRA Regulation), fewer players remain to compete or fill gaps.
• Consolidation Effects: Competition has also been reduced through mergers and acquisitions. For example, the French agency Spread Research was integrated into Qivalio SAS, while Euler Hermes Rating GmbH was rebranded under Scope Hamburg GmbH before its de-registration. Such consolidations have effectively reduced the diversity of independent providers, leaving fewer mid-sized CRAs to challenge the dominance of the “Big Three.”

Broader Implications

This trend poses several risks:

• Reduced Competition: Fewer players may lead to rating homogeneity, potentially reducing innovation and independence in credit assessments.
• Systemic Dependence: Over-reliance on a handful of global CRAs might amplify vulnerability in major rating events or conflicts of interest.
• Regulatory Paradox: While the CRA Regulation aims to bolster market transparency and competition, overly rigorous entry requirements may inadvertently reinforce incumbency.

Conclusion: A Market in Need of Renewal

The stagnant influx of newly authorised CRAs—as contrasted with the growing roster of exits and the consolidating influence of mergers such as Spread Research → Qivalio and Euler Hermes Rating → Scope—signals a structural squeeze in Europe’s credit rating market. Without adjustments to balance robust oversight with feasible entry pathways, the sector risks ossifying into a stable but constricted landscape dominated by a few large players.