The European Commission is considering a ban on rating agencies publishing their assessments of EU countries in difficulty, the Financial Times Deutschland reports. The European Union’s commissioner for internal markets and services Michel Barnier has drawn up a draft proposal empowering the new European Securities and Markets Authority to “temporarily prohibit” agencies from publishing their analyses on a country’s solvency, the newspaper said on Thursday.
FT Deutschland said it obtained a copy of the confidential draft. Barnier is concerned that the publication of a rating at an “inopportune moment” for a country when it is negotiating financial aid from the EU’s bailout fund or the International Monetary Fund could have “negative effects for that country’s financial stability and possible destabilising effects for the global economy.”
Politicians accuse rating agencies such as Moody’s, Standard & Poor’s and Fitch of totally misrepresenting the financial situation of individual countries, thereby only intensifying the crisis further. A downgrade of its sovereign debt rating has enormous consequences for a country, pushing up its borrowing costs and its loan repayments. Barnier will officially table his proposals by next month at the latest, and some amendments are possible, FT Deutschland said.
And now for a walk down memory lane with Deutsche-Welle ( all the way back to June 2010):
The European Union Commissioner for Economic Affairs, Olli Rehn, has criticized the US-based rating agency Moody’s for slashing its sovereign debt rating for Greece to “junk” status. Speaking during a debate in the European parliament in Strasbourg, Rehn said that the decision to cut Greece’s rating was both “surprising” and “unfortunate” at a time when EU and IMF auditors were taking a hard look at the country’s attempts to slash its debt.
The EU Commissioner said that the downgrade, which he had discussed with financial services commissioner Michel Barnier and European Commission president Jose Manuel Barroso, “again raises issues related to the role of credit rating agencies in the financial system.”
These boys make Enron look honest.