Economy

Rating agencies: European Parliament tightens the screws

17 January 2013
Presseurop
La Vanguardia, De Standaard

“Tightening control” over the rating agencies is the goal of the third wave of measures approved by the European Parliament, notes La Vanguardia, following a report led by MEP Leonardo Domenici, who feels the management of these agencies is marked by ”doubtful intentions” For the Barcelona daily –

The EU is attempting to put an end to the “bombs” that some rating agencies have launched by surprise in recent years, during the euro crisis, which have interfered with the European Union's political agenda.

In Brussels, De Standaard lists the steps: 1. Unsolicited debt ratings will be limited to three per year. 2. Investors can file suits against agencies if they break the rules. 3. The banks will have to evaluate their debtors at their own expense. After 2020, European legislation will no longer be able to refer to external ratings 4. An agency may not rate companies in which its own shareholders have invested.

Writing In the Flemish daily, the chief economist of ING Belgium, Peter Vanden Houte, warmly welcomes the third measure. As for putting limits on the ratings, he believes –

In reality, it means nothing. An event that affects the rating can happen every day.

As to the possibility of hauling the agencies before the courts, he worries that it sets

a dangerous precedent. It may drive agencies to become more cautious and to tend to post lower ratings.

Finally, regarding the last measurement, Vanden Houte thinks that

The only person it could apply to is Warren Buffett, who has a stake in Moody's. I don't think Moody's is influenced by him.