Thursday

1st Dec 2022

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

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe 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.

Investigation

Asbestos — two to three times more deadly than known

Where once working men in heavy industry were diagnosed with cancers related to a more direct exposure to asbestos, now women in professions such as teaching, nursing and other occupations are being diagnosed, as well as young people.

News in Brief

  1. 'Pro-Kremlin group' in EU Parliament cyberattack
  2. Ukraine will decide on any peace talks, Borrell says
  3. Germany blocks sale of chip factory to Chinese subsidiary
  4. Strikes and protests over cost-of-living grip Greece, Belgium
  5. Liberal MEPs want Musk quizzed in parliament
  6. Bulgarian policeman shot dead at Turkish border
  7. 89 people allowed to disembark in Italy, aid group says
  8. UN chief tells world: Cooperate on climate or perish

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. EU Commission proposes suspending billions to Hungary
  2. EU: Russian assets to be returned in case of peace treaty
  3. Frontex leadership candidates grilled by MEPs
  4. Portugal was poised to scrap 'Golden Visas' - why didn't it?
  5. Why the EU asbestos directive revision ... needs revising
  6. Nato renews membership vow to Ukraine
  7. Catalan spyware victims demand justice
  8. Is the overwhelming critique of Qatar hypocritical?

Stakeholders' Highlights

  1. European Committee of the RegionsRe-Watch EURegions Week 2022
  2. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  3. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  4. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  5. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  6. European Centre for Press and Media FreedomEuropean Anti-SLAPP Conference 2022

Join EUobserver

Support quality EU news

Join us