Brussels, 30/09/2010 (Agence Europe) - The US agency Moody's has just withdrawn its “Triple A” rating from Spain and on Friday 1 October, European finance ministers will discuss the need to introduce further regulation of the financial rating agencies. They will base their discussions on the note from the European Commission, which identifies four major problems: - excessive trust in external rating agencies; - the rating of sovereign debt; -the insufficient competition on the financial rating markets; - conflicts of interest linked to the most prevalent model for paying agencies, according to which the undertaking rated pays the company doing the rating. The Commission intends to launch a public consultation this autumn on this issue. This note, of which EUROPE has obtained a copy, recognises that the US introduced “more rigorous requirements” than in Europe, with regard to responsibility and transparency of agencies and also with regard to tackling problems related to conflicts of interest.
The Commission will ask ministers about possibilities for removing any reference to financial rating agencies from national and European texts, in an effort to limit excessive confidence granted to the external rating agencies. According to the Commission, this removal from the text is not feasible without an intermediate solution. The solution could consist of requiring financial institutions to set up specific risk management procedures and for supervisors to control these procedures. Ministers are also being invited to give their opinions on the possibility of inducing greater transparency in the ratings of sovereign debt, a situation identified as causing problems during the eurozone debt crisis. Rating agencies could be compelled to better explain the timetable and reasons why they gave a specific rating on sovereign debt. Recognising the existence of a market that is 95% dominated by three agencies (Moody's, Fitch, Standard & Poor), the Commission is looking at the question of emerging new actors. Should these new agencies be public or private, have general or focused aims on certain categories of shares (e.g. public debt, structured products)? Finance ministers are also being urged to give their opinions on the necessity of promoting other remuneration models, such as the one where those using a rating agency pay a fee to the agency that carries the rating out. (M.B./transl.fl)