EU to regulate credit rating agencies

Credit rating agencies will face mandatory regulation by the European Union after they failed to spot the risks of structured credit products that triggered the credit crunch.

Moody's, Standard & Poor's and Fitch, which dominate the lightly regulated sector, have been criticised for getting too close to their clients when giving ratings on debt instruments.

Charlie McCreevy, the EU's internal market commissioner, said self-regulation had not worked and that the agencies' voluntary code of conduct was "a toothless wonder". He dismissed the view of national regulators that a beefed-up voluntary approach was the best option.