This time it is the ESMA (European Securities Markets Authority) who is attacking the rating agencies: the three main agencies – Standard & Poor's, Fitch and Moody's – could in fact be fined by the European supervisory authority for not having remedied a series 'inadequate practices' in assessing the creditworthiness of government bonds.
In a report published today, ESMA disclosed the results of the survey regarding the ways in which Moody's, Standard & Poor's and Fitch compiled ratings on government bonds between February and October of this year. The report criticizes the delays in communicating the rating changes - in some cases 5 days after the decision to change the rating - and the poor confidentiality controls.
Sovereign ratings ended up at the center of the political debate at the height of the eurozone crisis, when Standard & Poor's infuriated Athens for downgrading Greece's debt rating as the country's bailout was renegotiated.
The controversy over the role and conduct of rating agencies led the European Union to draw up three laws on the sector in three years. According to the latest regulation, from next month agencies will be able to publish changes to sovereign ratings only on the basis of a pre-established timetable, to improve transparency.
"The ESMA investigation has revealed shortcomings in the government bond rating process that could lead to risks with respect to the quality, integrity and independence of ratings and the assessment process," chairman Steven Majoor told reporters.
S&P's has stated that it is committed to the highest standards and continuous improvement of its business. Moody's assured that it was committed to complying with European rules, while Fitch said it was confident that all its policies and procedures comply with regulatory standards and is ready to address the issues highlighted in the ESMA report.
