CE: Commission wants better quality credit ratings

Brussels, 15 November 2011 - Credit rating agencies (CRAs) are major players in today's financial markets, with rating actions having a direct impact on the actions of investors, borrowers, issuers and governments. For example, a corporate downgrade can have consequences on the capital a bank must hold and a downgrade of sovereign debt makes a country's borrowing more expensive. Despite the adoption of European legislation on credit rating agencies in 2009 and 2010, recent developments in the context of the euro debt crisis have shown our existing regulatory framework is not good enough. So, today the Commission has put forward proposals to toughen that framework further and deal with outstanding weaknesses.

Internal Market Commissioner Michel Barnier said: "Ratings have a direct impact on the markets and the wider economy and thus on the prosperity of European citizens. They are not just simple opinions. And rating agencies have made serious mistakes in the past. I have also been surprised by the timings of some sovereign ratings – for example ratings announced in the middle of negotiations on an international aid programme for a country. We can't let ratings increase market volatility further. My first objective is to reduce the over-reliance on ratings, while at the same time improving the quality of the rating process. Credit rating agencies should follow stricter rules, be more transparent about their ratings and be held accountable for their mistakes. I also want to see increased competition in this sector."

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