EU wants less dependence on rating agencies
(CS) While plans to ban credit ratings have been scrapped, EU commissioner Michel Barnier continues to call for reforms of the rating system.
Plans presented to the European Commission ask financial institutes to be less reliant on credit rating agencies' publication, but to rather seek out further information to arrive at an independent evaluation of credit worthiness.
Additionally, inner market commissioner Barnier wants agencies to have to report results to the European Markets and Securities Agency (ESMA), in order to be published in a European rating index.
While many EU commissioners, including Viviane Reding, had voiced support for an EU-based credit rating agency over the past months, this plan has been rejected. Barnier defended this decision, saying that such an institution would not be able to operate under the support of the EU in order to remain independent.
Instead, the changes to the existing agencies further include more frequent ratings, with a six-month rota envisioned rather than the current yearly ratings.
In another move the commissioner wants ratings to be published after the close of trading or no later than an hour before trading begins, in order to avoid shock effects on the markets.
In a document obtained by the Financial Times Deutschland in October Barnier had intended to proposed a temporary ban on credit ratings in order to protect the European economy.
The plans suggested at a meeting on Tuesday come after a blunder by rating agency Standard and Poor's, which accidentally issued a memo announcing the downgrading of France, which was later revoked, sending markets into a frenzy.
If the suggested changes come to fruition, the law is unlikely to come into action before autumn 2012.