1.Banks are required to use external ratings to determine risk weights for certain types of exposures. However, only external ratings provided by External Credit Assessment Institutions (ECAIs) that have been recognized as eligible for that purpose by the Central Bank may be used. This Guidance describes the specific requirements for the recognition of eligible ECAIs, together with certain other aspects of the use of ratings within the Central Bank’s capital adequacy framework. Note that additional requirements related to the use of ratings in capital requirements for securitisation are provided in the Central Bank’s Standards on Required Capital for Securitisation Exposures.

2.The Guidance is based closely on requirements of the framework for capital adequacy developed by the Basel Committee on Banking Supervision (BCBS), specifically the requirements articulated by the BCBS in International Convergence of Capital Measurement and Capital Standards: A Revised Framework (comprehensive version June 2006), and the revisions from Basel III: A global regulatory framework for more resilient banks and banking systems, December 2010 (rev June 2011).