Europe regulates at least the rating agencies

The rating agencies are going to be a little more supervised. The Commission makes a very timid proposal...

The rating agencies that bring rain and shine to the markets were, until recently, left unchecked. Deregulation of the financial markets obliges. Under the impact of the crisis, the European Commission began, a year ago, to put in place a framework. She decided to give, yesterday, a new turn of the screw. But less important than expected.

What already exists?

Europe has already set up a European Market Surveillance Authority which took office on 1 April. And the main agencies had to obtain approval. The first applications were accepted on November 1.

What does Brussels offer?

The European Commission wants to better assess and hold credit rating agencies accountable. These will be subject to evaluation twice a year, instead of once. They will be liable in court if they cause damage, “ intentionally or through gross negligence ". Everyone is thinking of the rating error that Standard & Poors made a few days ago. “Gross negligence” as the commissioner himself described it. “Senior” analysts will not be able to retain their clients for more than 4 years. A rotation is set up. The agencies will also have to provide additional information on how it rates state investments. And they will have to publish their methodology, their mode of remuneration... Quite technical provisions "which should not appeal to agencies ” underlines a person in charge of the file.

What was rejected?

This proposal is well behind what Michel Barnier had planned. The Internal Market Commissioner wanted to suspend the rating of countries benefiting from a European or IMF aid programme. He intended to prohibit an agency with more than 20% of the market from acquiring new agencies. The college of commissioners struck out these provisions. Part of the college - especially the liberal commissioners opposed it. As for the possibility of creating a foundation or public rating agency, once considered, it has not even been discussed.

And now ?

The Council of Ministers and the European Parliament must discuss this proposal. Entry into force expected: end of 2012. In the meantime, the agencies risk making other victims…

Nicolas GROS-VERHEYDE.

(article published in a short version, in Ouest-France, November 16, 2011)