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Worrying signs that Commission is already cowed by Credit Ratings’ Lobby as Barnier tables proposals

Date

15 Nov 2011

Sections

Euro & Finance

(15 November, 2011, Brussels) The European Commission has today released proposals to regulate Credit Ratings Agencies (CRAs). The Party of European Socialists (PES) have called the proposals ‘diluted’, with the main issue of establishing a European independent credit rating agency to oversee the agencies entirely absent from the final text.

Unchecked power and money is the big problem with Credit Rating Agencies””, said PES President Poul Nyrup Rasmussen. “Unfortunately, unchecked power and money is also a big part of EU lobbying, and it would seem that Ratings Agencies have been lobbying very hard to pre-emptively reduce the impact of the Commission’s proposals”.

Mr. Rasmussen comments follow on from reports  that the Credit Rating Agencies had campaigned vigorously to remove key proposals from the text. Mr. Rasmussen said that; “at this stage of proceedings, there should be a broad discussion. I think the idea of a European independent credit rating agency to counterbalance the excessive power of these agencies is entirely credible. To suggest otherwise is simply industry spin”.

The PES argues that an independent European body would solve the problem arising from the highly concentrated number of CRAs in the market and would make rotation of relationship with entities being rated feasible, since a European independent credit rating agency might have different position within the regulatory framework. The European body could quite feasibly assess the quality of assets for regulatory purposes but also for capital requirements, pension funds portfolios, and ECB’s acceptance of collateral.

The PES also called for stronger measures on indirect ownership, which is common practice in the credit rating market. A market abuse procedure proposed by the Europeans for Financial Reform would account for this loophole.

The PES did however welcome the proposal of the Commission on the possibility to impose a temporary ban on sovereign rating if the sovereign issuer is experiencing a particularly difficult situation. It is proposed that European regulator, the European Securities and Markets Authority (ESMA), would judge the necessity of such measure on an ad hoc basis.

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For further information please contact Brian Synnott on +32 474 98 96 75 (brian.synnott@pes.org)

The PES brings together 33 socialist, social democratic, labour and progressive parties in the European Union and Norway, a parliamentary group in the European Parliament (184 MEPs) and in the Committee of the Regions (247 members) - plus observer and associate parties and organizations from all over Europe. ECOSY and PES Women are respectively the Youth and the Women's organizations of the PES.

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