European MPs have called for measures to reduce reliance on the “big three” rating agencies – Moody’s, Fitch and Standard & Poor’s – and to limit their impact on sovereign borrowing costs.
The economic and monetary affairs committee also suggests conflicts of interest between agencies and corporates be addressed, which could see the introduction of civil liabilities for ratings.
Members of the European Parliament are seeking to introduce more competition “to counterbalance” the three agencies, which claim a 95 per cent market share.
The committee says the biggest issue for the more than one hundred national and regional rating agencies is building up credibility.
MEPs believe this can be achieved by meeting conditions to be registered by the European Securities and Markets Authority and by using data from the European Central Bank and International Monetary Fund.
The committee says criteria and data used for sovereign debt ratings “should be transparent” with countries able to prepare and publish comments before a rating is made public.
It also calls on European nations to be rated more frequently as this would help “reassure investors and the states in question”.
Reliance on Moody’s, Fitch and S&P could also be reduced by corporates assessing themselves, the committee says.
Conflicts of interest from agencies with close relationships to rated companies should be addressed to ensure ratings are reliable, “especially when they have a big impact on the financial markets”, according to MEPs.
The move comes as the UK Treasury select committee announced it would be seeking evidence for an inquiry into credit rating agencies, which will include asking whether the big three have become too powerful.