EU : Barnier considers EU rating agency

The European Union’s top financial services regulator said on Tuesday that he would look at establishing a new European credit rating agency, as he expressed concern and frustration over the way in which Greek debt had been dealt with by some existing agencies in recent days.

Michel Barnier, EU internal market commissioner who has responsibility for the financial services sector, told a group of European lawmakers that he had watched, with surprise, the “rapid deterioration of the [Greek] rating”.

“I’m as frustrated as you are,” he said.

Speaking at a meeting of the European parliament’s economic and monetary affairs committee, Mr Barnier said the power of the agencies was considerable, and that was why he had called on them last week to act responsibly and consider the impact of their actions.

The commissioner noted that new pan-EU rules governing credit rating agencies – which will require them to register for the first time and be more transparent about their methodologies – will come into force in December. This legislaton was passed last year in the immediate aftermath of the 2008 financial turmoil, when the role of agencies had again been subject to much criticism.

But on Tuesday Mr Barnier held out the possibility that there could now be further constraints on agencies’ activities.

“Will that be enough ? I don’t know. We’ll have to evaluate the situation very quickly,” he told MEPs.

One area the commissioner highlighted was whether there should be more diversity in the rating agency market, which is currently dominated by three players – Standard & Poor’s, Moody's, and Fitch.

“We need more competition and diversity in rating agencies,” he said.

The creation of a new European-based rating agency could help to resolve that problem. But Mr Barnier gave few details of how such an institution might work and whether, for example, it should be publicly or privately-owned. Officials said afterwards that the commission’s thinking in this area was still at a very early stage.

Mr Barnier’s comments came in the course of a wide-ranging hearing, in which he laid out the commission’s extensive plans for new financial services regulation this year and promised that Brussels would fulfil all its G20 commitments on this score over the next 12 months.

He said he would be asking the Commission to adopt a “green paper” next month aimed at reinforcing corporate governance in financial firms, and pushing ahead with further improvements to the deposit guarantee fund directive during the summer. He also pledged to go further, in terms of new disclosure rules on short-selling, than the current proposals put forward by EU securities regulators.

Mr Barnier had earlier proposed delaying the entry into force of new solvency rules for the insurance sector until the end of 2012. Although the delay is a relatively short two months, it could give more time to thrash out details for the new regime.

http://www.ft.com/cms/s/0/51029238-578b-11df-b010-00144feab49a.html

 

Debt problems that are causing yields to soar?

No worries! Just have the new European rating agency stamp all European debt with AAA rating! Problem solved!

What a joke.

 

Another proof that governments lag behind the industry.

The time for setting up a new rating agency couldn't have been chosen better - right after the recent crisis has demostrated that the idea of relying on rating agencies is flawed.