Sunday

25th Aug 2019

EU clampdown on ratings agencies defeated

France’s man in the European Commission has been stymied in his efforts to clamp down on the power of credit ratings agencies, with the core of his proposals sent back for further assessment under pressure from his colleagues.

The proposals of internal market commissioner Michel Barnier to temporarily suspend the credit rating of troubled states at times of high market volatility have been shelved.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • The shelving of the core of Barnier's proposals is a major defeat for the Frenchman (Photo: European Parliament)

The plans included a 'blackout' in the rating of troubled states in exceptional circumstances in an attempt to limit the ratcheting up of market instability the EU executive accuses the sector of being responsible for when it has delivered downgrades to the credit ratings of countries.

Following a meeting of commissioners where Barnier was confronted with stiff opposition from a number of his colleagues, the Frenchman said that more time was necessary “to really go into technical details of how a temporary suspension could be implemented.”

The retreat comes atop an earlier reversal when plans to create the EU’s own credit rating agency were also shelved after being assessed as unworkable.

And Barnier’s aim to limit mergers in the sector were also sent back for further work.

However, actors who use the agencies, such as banks and corporations, will still be forced to rotate the firm they employ in an effort to introduce more competition into the sector, which is dominated by the big three, Fitch, Moody’s and Standard & Poor’s, and develop the minor-league European rating agents.

According to the draft plans, firms will have to rate the agency they use every three years.

But if they use two or more firms, they are then allowed to rotate just one of the firms every three years and the other agencies would be required to be rotated every six years.

Barnier did manage also to hold on to plans to award the European Securities and Markets Agency the power to force agencies to seek approval for the methodologies employed to assess the credit of market actors.

What remains of the proposals must still be approved by the EU member states and the European Parliament.

Poul Nyrup Rasmussen, the president of the Party of European Socialists, was quick to attack the “cowed” retreat as the product of big money lobbying and “unchecked power”.

“Unchecked power and money is the big problem with credit rating agencies””, he 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."

A relatively new kid on the lobbying block, the Association for Financial Markets in Europe (AFME) - the financial sector lobby outfit established in the wake of the economic crisis to protect the sector's interests after governments announced they would begin re-regulating the financial world - still felt the retreat did not go far enough.

Simon Lewis, chief executive of AFME said: “It is important to have more competition in the credit rating agency sector, but it is also critical to maintain the quality, stability and independence of credit ratings. While the slight relaxation of the draft rotation requirements is a step in the right direction, significant questions remain."

Brussels to unveil credit-rating clampdown

The European Commission on Tuesday is to unveil proposals to clamp down on the credit-ratings industry, seen as one of the key villains in the eurozone debt crisis melodrama.

Exclusive

Brexit row delays financial products transparency review

A European financial regulatory body set up after the financial crisis is at loggerheads with the European Commission over whether to carry out a transparency review of certain financial products. The reason: Brexit.

Commission defends Mercosur trade deal

EU commissioners defended a far-reaching free trade agreement between the EU and four Latin American countries, against critics who fear it will damage European farmers' livelihoods and the global environment.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

News in Brief

  1. Ocean Viking to disembark in Malta after ordeal
  2. Germany joins France in world outcry on Brazil fires
  3. British people lose faith in Brexit deal
  4. Brexit hardliners want further changes to EU deal
  5. German manufacturers confirm fear of recession
  6. Belgian socialists and liberals scrap over EU post
  7. Fall in EU migration leading to UK skills shortages
  8. Switzerland makes post-Brexit flight preparations

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. Spain heading for yet another general election
  2. EU to discuss Brazil beef ban over Amazon fires
  3. 'Our house is burning,' Macron says on Amazon fires
  4. What happens when trafficking survivors get home
  5. EU states and Russia clash on truth of WW2 pact
  6. EU considers new rules on facial recognition
  7. EU to pledge Africa security funds at G7 summit
  8. Letter from the EESC on per diem article

Join EUobserver

Support quality EU news

Join us