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MEPs call for less reliance on “big three” rating agencies

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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.

 

 

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Readers' comments (9)

  • Since the big three seem to love lording it over every institution that requires credit and then hide behind 'it's an opinion' when challenged on why they got it so wrong, the sooner this happens the better.

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  • Does this not sound a bit like, we dont like what you say, it causes us problems so we will take action to try and limit how much voice you have.

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  • You naughty S & P and Moody's and Fitch, how dare you pass an opinion on our Eurozone economies, which incidentally are in dire straits, but we don't want to have to pay higher interest on borrowings to prop up the failed currency, so please stop telling the truth about us.

    Someone has to tell it like it is.

    The Euro is effectively a dead duck, a poor concept at best and badly planned and implemented, let's give it a decent burial.

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  • Long overdue - it is not about not liking what they say it is about a ridiculous power base and no accountability - All our now tax payer owned banks were AAA remember. These organisations have too much say and can ultimately manipulate markets - My guess is a small number of people are in a position where they can make huge amounts of money - whether they do or not is a different issue. Watch this space, I predict another enquirey at some stage!

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  • its like the Mafia - do as we say or we will get rid of you!

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  • So the Meddling European Parasites (MEPs) do not like objective observations that their beloved Euro is on its way down and their member states with it.

    Their grand socialist plan has failed abysmally. Time to face the reality of that fact and fix the problem not condemn those who would speak the truth.

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  • The committee says criteria and data used for sovereign debt ratings “should be transparent”

    This is from people whose own affairs are so transparent that their accounts have not passed audit - ever!

    The EU is rife with corruption and neither the politicians nor the unelected bureaucrats have demonstrated competence or trustworthiness. What they are saying is "We know we only repaid 60% of the money you lent to Greece, but lend us some more and we promise to repay you in full this time"

    The fact is that they have demonstrated that they can not be trusted to repay their debts with as much certainty as previously and so investors are quite right to expect a greater reward in return for the greater risk.

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  • Delicious Irony...
    The French and Germans were instrumental in making sure that the independent ratings agencies played a key role in the EU following the basel II agreement as they did not trust the other member countries to do it.
    This toally undermined the EU central banks ability to monitor credit ratings independently of the agencies. Now the EU or at least the MEP's don't like what they set up, ha ha ha!

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  • The EU doesn't respect audits so they havn't had their accounts signed off by the auditors for 17 years.

    The EU thinks that if rating agencies, IMF etc were silenced then they can carry on borrowing at cheap rates. All that would happen is that they would go bankrupt but without the warnings.

    If my pension fund manager decides to opt for safe Gilts when I approach retirement then I wouldn't want my fund buying bonds in a country that was about to default on their bonds! The public need rating agencies to protect them from reckless companies and politicians.

    Beggars belief!

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