–Calls For CRAs To Release Ratings Information, Methodologies

BRUSSELS (MNI) – A new Europe-wide supervisor will watch over
credit ratings agencies operating in the region and will recommend
penalties for offenders, the European Commission said on Wednesday as it
announced plans to increase the transparency and the competition in the
ratings market.

The Commission has long argued that the biggest ratings agencies –
Standard & Poor’s, Moody’s and Fitch – have too much power, with their
decisions sometimes becoming self-fulfilling prophecies. After Greece’s
debt rating was lowered earlier this year it found it’s cost of
financing rose so much in the market that it was almost impossible for
it to finance its debt and was forced to ask for aid.

Under the plans set out on Wednesday, credit ratings agencies would
be required to register before they are allowed to operate in the
European Union, the European Commission said. After registration they
would be required to disclose all the information they use to compile
their ratings decisions, including their methodologies, the Commission
said.

A new body, the European Securities and Markets Authority (ESMA),
would be in charge of the registration and supervision of credit ratings
agencies. If one of the ratings agencies were found to be in breach of
transparency rules or to have a conflict of interest, ESMA could request
that the European Commission impose sanctions on that agency or, in
extreme cases, withdraw the agency’s license to operate.

In practise, a Commission source said, withdrawing a license would
be a last resort option. “We call this a kind of atomic bomb,” the
source said.

The Commission’s proposal aims to ensure efficient and centralised
supervision at the European level and to increase transparency so that
all agencies have access to the same information, the EU’s executive arm
said in a statement.

The proposal has won the endorsement of a major player in the
rating industry.

“The new EU regulations will play an important part – alongside the
measures that S&P has taken independently – in building market
confidence in the integrity and transparency of ratings,” a spokesperson
for Standard & Poors said.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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