FOR REGULATED FIRMS

You're Regulated

An independent validation report your board can approve and your supervisor can read: the tests run, the findings ranked by supervisory risk, and a reviewer outside your build team. We never validate a model or methodology we helped build.

Book a call What we deliver

What ESMA will ask about your rating methodology

THE SUPERVISOR ASKS
OUR REPORT ANSWERS
"Who challenged this methodology, and how?"
A review from outside the build team, with its scope, tests and findings written down.
"Was it back-tested where history is thin?"
Back-testing segment by segment, with a separate finding on each thin-history segment that carries rating weight.
"Are overrides really exceptional?"
The frequency and direction of overrides, set against rating outcomes, and any systematic bias.
"Where do the weightings come from?"
Each weighting tied to its stated rationale, and the sensitivity of the final rating to each input.
"Can each input be traced to its source?"
Each input traced as far back as its sources allow, and the points where the trail stops.

Engagements

Three ways we work with regulated firms

For credit rating agencies, ESG rating providers, banks and stablecoin issuers.

Methodology Validation Report

An independent validation of your rating methodology and its models, for your board's approval and your ESMA file.

Call us when

  • ESMA comes back with targeted questions on your methodology file.
  • You are applying for ESMA authorisation to provide credit or ESG ratings, or your application is under review.
  • A new methodology or a material change must be reviewed before use.

Why us

  • From inside a supervised agency: over four years at an ESMA-supervised credit and ESG rating agency, more than three as head of model validation, including its answers to supervisory questions.
  • Judgement on what to test: the tests a supervisory finding turns on, not a checklist.
The report covers
  • Credit ratings: discriminatory power, calibration and stability, back-tested on default and transition data.
  • ESG ratings: with no default to back-test against, the sensitivity of the rating to its weightings, the lineage of its data, and whether it measures what it states: risk to the company or the company's impact.
  • Conceptual soundness and application: the methodology against its stated purpose and the regulation, and whether committee overrides moved the final ratings.
  • Board presentation: the report presented to your board, each finding ranked by supervisory risk.

Not covered

Writing or rewriting the methodology, implementing the remediation.

Illustrative one-year rating transition matrix, with one finding flagged: grade BB is less stable than grade B AAA AAA AA AA A A BBB BBB BB BB B B CCC CCC FINDING: BB LESS STABLE THAN B FROM To, one year later
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Risk Model Validation Report

An independent validation report on one model, for your board's approval and your supervisor's review.

Call us when

  • Your supervisor has open findings on a model or on your stress-testing framework.
  • Your internal validation team cannot cover this year's model inventory.
  • You are preparing a MiCA authorisation or a GENIUS Act application as a stablecoin issuer.
  • Your stress tests could lead your authority to require between 20% and 40% more own funds (MiCA Article 35(5); for significant e-money tokens, Article 58).

Why us

  • From inside a supervised firm: over four years at an ESMA-supervised rating agency, more than three as head of model validation, applied here to bank credit models and stablecoin reserves.
  • Independent of the build: we never validate a model we helped build.
The report covers
  • Credit risk models: back-testing, calibration and discriminatory power, read against the EBA guidelines, and the data gaps behind each input.
  • Stablecoin reserves: coverage of redemptions by asset and by custodian, under market and redemption stress scenarios and the correlations between reserve assets.
  • Conceptual soundness and presentation: the model's design against the applicable standard, and the findings presented to your risk committee, ranked by supervisory risk.

Not covered

Building or rewriting the models we validate, your authorisation or application file, correspondence with your supervisor, or reserve-asset selection.

Illustrative redemption stress test: after haircuts and three days of outflows, liquid assets fall below the minimum on day 3 Reserve Haircuts Day 1 Day 2 Day 3 Left MINIMUM LIQUID ASSETS BREACH ON DAY 3 Stablecoin reserve under a redemption run
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Fractional Head of Risk & Quant

A senior quant and risk lead inside your team, to build your models or to run their periodic validation.

Call us when

  • Your review or validation lead has left, and the annual review is still due.
  • Your authorisation requires a dedicated risk function, and you need it designed before you hire.
  • Your risk function rests on one person, and supervisory findings are piling up.

Why us

  • From inside a supervised agency: over four years at an ESMA-supervised rating agency, more than three as head of model validation.
  • Research-trained: a doctorate in applied mathematics (ENS, CNRS) and papers on credit ratings and asset-liability management.
  • One role per model: on any one model, we build it or we validate it, not both, as supervisors expect.

Periodic validations can be bought as standalone reports or run within the retainer.

The seat covers
  • Build and document: credit, ESG, reserve or liquidity models, documented for their review.
  • Validation: the periodic reviews your regulation requires, only on models we did not build.
  • Board and committee: risk frameworks and remediation plans presented to your board or risk committee.

Not covered

Correspondence with your supervisor, or assuming management-body liability.

Illustrative retainer calendar: days of work each month, with reports to the board or committee J F M A M J J A S O N D SET DAY REPORT TO BOARD OR COMMITTEE
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Contact

Tell us the model and the deadline in front of you.

A 30-minute call.
Confidential: we sign your NDA before any data changes hands.

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Prefer email?
contact@euleradvisory.eu