Sunday

29th May 2016

EU-based credit rating agency buried

  • Irish bank - the idea was to break the US agencies' monopoly on ratings (Photo: Fergus Ray Murray)

Plans to launch an independent European credit agency have fallen apart after it failed to generate enough interest in the business world.

After three years of efforts, its co-founder renounced the plans in an interview with the German daily Handelsblatt on Tuesday (30 April).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

“There were not enough investors,” Markus Krull, a former senior partner in the German-based consultancy firm Roland Berger, told the daily in an interview.

Berger, as a partner, planned to help launch the enterprise by seeking out 30 investors to create a foundation with some €300 million in start-up capital.

Krull envisioned an agency that would compete with the US-based equivalent Standard & Poor’s, Moody’s and Fitch.

All three US-based agencies work on a for-profit basis that Krull wanted to challenge with an agency based on a foundation model.

Investors, borrowers, and public administrations use the agency reports to help make investment and financial decisions.

The US-based agencies dominate 95 percent of the market.

All three have come under considerable criticism for how they have rated a number of sovereign states since the start of the financial crisis in 2008.

Standard & Poor’s and Moody’s settled lawsuits with Abu Dhabi Commercial Bank and King County, Washington, over the weekend and agreed to pay out claims that they defrauded investors just before the US housing crisis, reports the Financial Times.

Standard & Poor’s says the settlement is not an admission of guilt.

The US justice department is also suing Standard & Poor’s for $5 billion for allegedly handing out top credit ratings on subprime mortgage vehicles for large fees despite knowing their inherit dangers.

In January this year, the European Parliament voted through new rules on when and how credit rating agencies may rate state debts and the financial health of private companies.

The new rules will allow private investors to sue the agencies for negligence. It also places a cap on an agency’s shareholdings in the firms it rates.

“The new rules will contribute to increased competition in the rating industry dominated by a few market players,” said EU internal market commissioner Michel Barnier following the parliament vote.

News in Brief

  1. Syrian refugees sue Denmark over immigration law
  2. Ukraine bans Gorbachev for backing Crimea's seizure
  3. Dozens dead in two shipwrecks outside Libya
  4. Slovak PM says his country is no place for Muslims
  5. Juncker's spin-doctor warns of populist 'horror'
  6. EU urges Hungary to end discrimination of Roma children
  7. Majority of voters think UK will stay in EU
  8. Leading MEP says Greek bailout will not work

Stakeholders' Highlights

  1. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  2. EPSUTrade Unions Back New Undeclared Work Platform
  3. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  4. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  5. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  6. Swedish EnterprisesNew rules for posted workers - Better Protection or the End of Posting ?
  7. World VisionWhy The EU Needs to Put Children at the Centre of Emergencies - In Their Words
  8. ACCASustainability Reporting in Danger of Losing Its Momentum Says ACCA and CDSB
  9. Dialogue PlatformDiversity as Heritage of Humanity! Join the “Colors of the World“ Show at the EP
  10. Centre Maurits CoppietersNew Responses to the Basque Peace Process? MEP Juaristi on Stateless Challenges Conference
  11. European Healthy Lifestyle AllianceImproving Cardiovascular Health Begins by Closing the Gap in Sex Disparities
  12. IPHRBrussels Talks to Take Stock of Human Rights in Turkmenistan