Regulatory Alerts2014-10-20 | Notes on the use of external ratings and on making own credit risk assessmentsNotes on External Ratings and Own Credit Risk Assessments
BaFin issued this interpretative decision to align German supervisory practice with EU regulations, mandating that insurance undertakings and occupational retirement institutions conduct their own credit risk assessments instead of relying solely or mechanistically on external ratings. The decision updates existing circulars by clarifying how internal evaluations interact with external and split ratings, permitting asset-backed securities to qualify for restricted assets based on internally verified investment-grade assessments. It further promotes voluntary internal credit reporting by establishing quantitative and qualitative plausibility checks that allow favorable own ratings to offset lower external ratings under the Credit Rating Agencies Regulation.