SARB PA to derecognise Moody's Ratings SA as eligible ECAI
The South African Reserve Bank's Prudential Authority intends to derecognise Moody's Investors Service South Africa (Pty) Ltd as an eligible external credit assessment institution. Banks may continue to use Moody's ratings until April 2028, when the derecognition becomes effective.
Registration revoked, recognition follows
South African banks are permitted to use external credit ratings for calculating minimum required regulatory capital, provided these ratings are issued by institutions recognised as External Credit Assessment Institutions (ECAIs).
The Prudential Authority (PA) grants this recognition, assessing ECAIs against eligibility criteria outlined in regulation 51 of the Regulations relating to Banks.
Moody's Investors Service South Africa (Pty) Ltd (Moody's Ratings-SA) was previously an approved ECAI, allowing local banks to use its credit ratings for risk-weighting purposes under section 85A of the Banks Act 94 of 1990.
However, a fundamental requirement for ECAI approval is registration and licensing as a Credit Rating Agency (CRA) under the Credit Rating Services Act 24 of 2012.
On April 16, 2026, the Financial Sector Conduct Authority (FSCA) published a notice cancelling Moody's Ratings-SA's CRA registration.
This regulatory action by the FSCA directly necessitates the PA's intention to derecognise Moody's Ratings-SA as an eligible ECAI.
Two-year transition for banks
The derecognition of Moody's Ratings-SA as an eligible ECAI will not take immediate effect.
Banks may continue to use the external credit ratings issued by Moody's Ratings-SA for a period of 24 months from the date of the FSCA's cancellation notice, which was April 16, 2026.
This means the derecognition will become effective in April 2028.
Following this transition period, the Prudential Authority intends to issue an updated Directive on Matters relating to eligible ECAIs.
This new directive will replace the current Directive 7 of 2023 and formally effect the derecognition of Moody's Ratings-SA, ensuring a clear regulatory framework for banks.
Procedural clarity, minimal disruption
This communication clarifies the regulatory landscape for South African banks, ensuring alignment with foundational licensing requirements for credit rating agencies.
While a significant procedural step, the extended 24-month transition period offers ample time for institutions to adjust their risk-weighting frameworks without immediate operational disruption.
Ultimately, the move reinforces the PA's commitment to robust regulatory oversight, even if the direct impact on capital calculations is deferred.