Brussels, 20/06/2012 (Agence Europe) - The European Parliament's economic and monetary affairs committee has managed to give more meat to the European Commission's draft reforms of credit rating agencies, said rapporteur Leonardo Domenici (S&D, Italy) on Wednesday 20 June, the day after the committee voted on this report. He said stronger measures had been introduced on sovereign debt, conflicts of interest and excess dependency.
On the credit rating of sovereign debt, MEPs made changes to rating agencies' yearly activities, said Domenici, requiring them to set at least three publication dates for sovereign debt ratings each year in order to water down the disastrous impact of writing down a country's debt at a time when a country is particularly vulnerable.
To limit conflicts of interest within rating agencies, the committee reduced the cap on the agency's capital that may be owned by a financial body from 10% to 2%, and the financial body or bank in question may not be rated by that agency.
To reduce over-dependence on credit ratings, MEPs want financial institutions to develop their own rating systems, but the GUE/NGL Group is unhappy that the idea of setting up a European credit rating agency has been put on the back burner. Domenici said the committee had, however, opened the door to such an agency in the future.
The GUE/ NGL Group says that the initial draft has been watered down due to compromises with right wing parties and the window of opportunity to put tighter screws on credit rating agencies to prevent disaster has been lost. The Greens/EFA say that more could have been done to undermine the dominance of the Big Three (S&P, Moody's and Fitch).
The idea of rotating credit rating agencies in order to generate competition will not be required every three years, as initially suggested, but every five years and will only cover structured lending. European sources suggest this is an extreme measure and countries like France like the idea of making agencies submit to calls for tender every now and again.
Domenici said he wanted to enter talks immediately with the Council of Ministers and the European Commission so that the plenary can vote on the matter in September, but said there was likely to be a conflict with the Council of Ministers and said he was open to compromise. The question is not on the agenda of Friday's ECOFIN Council meeting. (EL/transl/fl)