Rating agencies: the European Commission presents the new rules but too timid

Neither stop ratings during crises nor Rating Authority: the European Commission would like to downsize the devastating rating agencies but its rules are too timid – The new package was presented today in Strasbourg by Michel Barnier, European Commissioner for the Internal Market – “Agencies have become too important.”

Reduction of dependence on the grades awarded, use of rating agencies "only in the alternative", ban on holding 5% of a rating agency for those who already own 5% of another agency, punishments for rating institutions in the case of “deliberate infringement or negligence”. These are the main points contained in the new regulatory package for rating agencies, presented today in Strasbourg by Michel Barnier, European Commissioner for the Internal Market. Among the measures that will now pass to the scrutiny of the EU Parliament and Council, there is no provision for any independent European agency, nor the supervisory authority of the rating agencies, while "there is still discussion about the possibility of proceeding with the temporary suspension of debt assessment in some cases ”, Barnier said in a press conference. In short, the most awaited measures disappear from the final text, and the 'surrounding' ones remain.

“The rating agencies – he continues – are very important, but I think that at present they have become too important”. For this reason it was decided to work on several fronts. In the first place, explains the Eurocommissioner, "we want to reduce the dependence on the ratings" given by the rating agencies and the idea is to "resize" this appeal, if not even "eliminate it". Secondly, he continues, "all regulated financial institutions" are asked to take greater responsibility in conducting their own risk assessments and to "apply only subordinately to rating agencies". In this sense, it is proposed to proceed with semi-annual rather than annual updates and to publish them before the opening of the markets and to send them to the governments of the states concerned 24 hours before publication.

Other points on which Parliament and the European Council will have to express themselves are the prohibition of control of several rating agencies at the same time and the establishment of a civil liability regime. As for the first point, explains Barnier, the shareholder who holds 5% of an agency will not be able to buy or hold more than 5% of another agency, while for the other aspect sanctions are being requested against the agencies "in the case of deliberate infringement or negligence".

The hypothesis of a temporary suspension of the assessment of sovereign debt for countries under a solidarity program is being considered and "is under discussion", Barnier said. Decisions have not been taken and perhaps they will come at a later time, but for now no stop. As for the establishment of an independent authority, this is not even considered.

“It's a proposal we've studied, but it's about acting quickly,” explains Barnier. "An agency would have cost between 300 and 500 million, which we don't have." In short, now there is no time or money to proceed in this direction. "Maybe one day it will be created", adds the EU commissioner for the Internal Market, who closes the press conference by announcing actions against Standard & Poor's, which by technical error issued a statement announcing the possibility of a cut in France's rating. "I don't know if we can talk about insider trading but I will ask the legal system to clarify".