Brussels, 09/02/2012 (Agence Europe) - The credit rating of sovereign debt should be covered by special rules and involve independent EU public authorities, argues Leonardo Domenici (S&D, Italy), the European Parliament's rapporteur on the draft EU regulation on credit rating agencies (see EUROPE 10495). In his draft report, to be submitted to the EP's economic and monetary affairs committee at the end of the month, he recommends that any credit rating not requested by an EU member state be banned and the only body that should be allowed to issue ratings for EU countries' sovereign debt should be an EU public institution.
The rapporteur says it is paradoxical that statements issued by credit rating agencies do not usually provide any new information, yet they have a huge impact on investment. Six months ago, the Big Three (Moody's, Standard and Poor's and Fitch) said that the only way to solve the debt crisis was increasing doses of austerity, but they now tell member states they need increasing doses of economic growth, he commented, wondering whether the ratings had any point. Domenici did not give any details about how his idea of banning the unrequested rating of sovereign debt could be applied in practice, his main aim seeming to be to stimulate debate. Asked whether his idea was similar to the idea initially expressed by EU Internal Market Commissioner Michel Barnier, that was not included in the draft regulation, of a ban on the rating of eurozone countries in receipt of international aid (Greece, Ireland and Portugal), Domenici said he didn't think it was a good idea to suggest exactly the same thing. He wanted to achieve the same results or outcome through other means, he added. He did not suggest which independent EU institution or body (the ECB or EIB, perhaps?) might carry out such ratings. His draft report calls on the European Commission to issue tangible proposals six months after the regulation comes into force.
The rapporteur suggests changing the definition of a credit rating, which is currently considered as opinion, to turn it into “an information service provided to investors and consumers”, which would make it possible to hold rating agencies more to account. In order to introduce competitors to the Big Three (which control 90% of the market), the draft report takes up the idea of compulsory rotation of rating agencies and Barnier's idea of banning mergers and acquisitions in the market. The report echoes the desire by international regulators to end over-reliance on external ratings. Domenici suggests that the Europeans Securities and Markets Authority (ESMA) assess the performance of rating agencies and lay down guidelines for payment by investors making use of ratings rather than the body actually being rated. (MB/transl.fl)