EU credit rating reform in tatters

Commissioner Michel Barnier is forced to step back from plans to make bond-issuers rotate agencies

Michel Barnier, European Commissioner and the scourge of the financial services industry, is close to succumbing to a backlash against his plans to heavily regulate credit ratings agencies.

The Frenchman was behind proposals to force bond issuers to rotate credit rating agencies in a move that he believed would break the stranglehold of the big three: Moody's, Standard & Poor's, and Fitch.

As the man responsible for the bloc's internal market and services, Mr Barnier is perhaps the most significant of many politicians who believe that the agencies' failure to spot risks in banking performance was a major factor behind the global economic crisis. But, EU finance ministers, MEPs, and the UK financial services industry reacted with scorn to Mr Barnier's proposal. He wants to see the ratings agencies that companies and banks use to assess the strength of their bonds moved around every three to six years.

As companies tend to use two agencies on their bond issues, there are fears that this would simply mean replacing one with another of the big three, which have a hold on roughly 95 per cent of the market.

Mr Barnier believed that rotation would encourage the development of a second tier of agencies, but it is widely felt that few have the capabilities to evaluate more than a handful of extremely complicated bond issues. A market source described the proposal as "highly impractical".

Sharon Bowles, the Lib Dem MEP who chairs the European Parliament's powerful Economic and Monetary Affairs Committee, told The Independent on Sunday: "It looks as if the Commission and Ecofin [part of the EU Council] is moving away from rotation to something that is more relaxed."

With so much regulation going through the Council and Parliament, such as the Solvency II reforms to insurance company's capital requirements, it also seems likely the remainder of Mr Barnier reforms will be delayed. He had hoped that the complicated process, which includes getting a majority out of the political factions on Ms Bowles's committee which then brokers an inter-institutional agreement, would be completed before the summer recess. This now seems unlikely until the 2012-13 session.

Watering down the proposals will be a relief to the agencies, which have faced several reforms recently, including being forced to pay a percentage of turnover to cover the costs of the new regulator, the European Securities and Markets Authority.

PROMOTED VIDEO
Arts and Entertainment
tv
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Life and Style
fashionAngelina Jolie's wedding dressed revealed
Sport
Alexis Sanchez, Radamel Falcao, Diego Costa and Mario Balotelli
footballRadamel Falcao and Diego Costa head record £835m influx
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Madame Vastra and Jenny Flint kiss in Doctor Who episode 'Deep Breath'
tv
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Arts and Entertainment
Danish director Lars von Trier
tvEnglish-language series with 'huge' international cast set for 2016
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Executive Assistant/Events Coordinator - Old Street, London

£35000 - £38000 per annum + benefits: Ashdown Group: Executive Assistant/Event...

HR Generalist (standalone) - Tunbridge Wells - £32,000

£30000 - £32000 per annum: Ashdown Group: HR Generalist (standalone) - Tunbrid...

Derivatives Risk Commodities Business Analyst /Market Risk

£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...

Power & Gas Business Analyst / Subject Matter Expert - Contract

£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering