Brussels, 05/06/12 (Agence Europe) - The European Policy Centre (EPC) think-tank organised a debate on Monday evening on a plan for a non-profit-making credit rating agency following a talk by Annette Heuser, managing director of the Bertelsmann Foundation. Vincent Truglia and Edward Emmer, former directors general of Moody's Investors' Service and Standard and Poor's respectively, along with Mario Nava, Director of Financial Institutions at DG Internal Market at the European Commission, criticised the idea mooted by the Bertelsmann of setting up its own credit rating agency.
Annette Heuser said that the Bertelsmann Foundation idea had been sparked by the fact that everyone is affected by credit ratings, from markets to taxpayers. She regretted the way the downgrading of a rating is never explained and says that credit rating agencies should be a public service and governments should be involved. The funding needed for the first few years in operation of an INCRA (International Non-Profit Credit Rating Agency), estimated at some USD 400 million, would be provided by both the public and private sectors, but to avoid conflicts of interest, a shareholder council would ensure independence.
Heuser said the idea of a European agency would not solve anything and an INCRA was the only credible alternative to the Big Three (Moody's, S&P and Fitch) which between them account for 95% of the market. Nava disagreed, saying that the more new agencies there were, the better the quality of the market. He said a European agency should be seen as a complement rather than a competitor.
Emmer said that, in his experience, competition reduces the quality of ratings, adding that the rating itself should be a starting point, rather than the end product.
Truglia said that changes in the market would inevitably lead to changes in credit rating agencies and that it would soon be seen whether the Bertelsmann Foundation model was the best, because if so, the other agencies would soon copy it.
Heuser said that agencies like Moody's are very secretive, and Truglia admitted that credit analyses were only available for subscribers. Heuser said she wanted everyone to be able to consult the analyses and hoped the G20 would persuade the institutions and find investors.
If an INCRA were to be set up, then it would initially only rate national governments, then, after a year, supranational bodies like the EU and the IMF. She has no plans, however, for rating the banking sector. An INCRA would give itself five years to assess its long-term viability and would reimburse investors if it was found not to work at the end of those five years, said Heuser. (EL/transl.fl)