23.For the purpose of applying ECAI ratings to derive risk-weights for exposures, banks should apply the following process:

1. (i)Identify an ECAI (the “nominated ECAI”) whose assigned ratings the bank intends to use to derive risk weights for some type of exposure that is subject to an external ratings-based approach under Central Bank standards;
2. (ii)Confirm that the nominated ECAIs can provide reasonable coverage of the bank’s exposures in terms of the types of counterparties and the geographical regions covered;
3. (iii)Document the selection of the ECAI and the analysis demonstrating that the ratings of ECAI are appropriate for the specific use;
4. (iv)Notify the Central Bank of the nominated ECAI and of the intended application of the ratings of that ECAI to the bank’s external ratings-based calculations; and
5. (v)Use the ratings of the ECAI within external ratings-based calculations consistently.

24.Banks must use the chosen ECAIs and their ratings consistently for each type of claim for which the ECAI and its ratings are approved, and must seek the consent of the Central Bank on any subsequent changes to the application of those ratings. Banks may not “cherry-pick” the ratings provided by different ECAIs, and must maintain records of which ECAIs they use for various purposes within capital adequacy calculations. Banks may not use unsolicited ratings that may be provided by any ECAI.

25.When banks use external ratings to assign risk weight to securitisation exposures under the Central Bank’s Standards on Capital for Securitisation Exposures, additional operational requirements apply to the ratings and the ECAI that is the source of the ratings.