MEPs called on Tuesday for measures to reduce reliance on the credit ratings of the "big three" agencies and limit their direct impact on countries' borrowing costs. Conflicts of interest between agencies and the companies that they assess should be addressed, e.g. by introducing civil liability for ratings, they added.
In a preliminary exchange of views in the Economic and Monetary Affairs Committee, Parliament's rapporteurs advocated more competition among agencies, an end to conflicts of interest, and more transparent criteria for rating sovereign debt.
Leonardo Domenici (S&D, IT) who will steer the proposal through the Parliament, announced that Parliament will scrutinise three key issues in depth..
Introducing more competition to counterbalance the three major agencies, which have a 95 % market share, should be a starting point.
There are over one hundred national and regional rating agencies which could issue ratings if they can build up their credibility by meeting the conditions for being registered by European Securities and Markets Authority (ESMA). They could also use data from the ECB and IMF to help with their analyses.
Reliance on the "big three" could also be reduced by big companies assessing themselves, MEPs added.
Addressing conflicts of interest
Conflicts of interest arising from agencies having a close relationship with rated companies, will have to be addressed to make sure that the ratings are reliable, especially when they have a big impact on the financial markets.
Some illicit situations, in which credit rating agencies shareholders make money betting on the ratings, should be restricted. Introducing civil liability for the agencies' ratings and making them financially responsible may be the part of the solution.
More transparency in sovereign debt rating
The criteria and data used to produce sovereign debt ratings should be transparent. States that are rated should be given time to prepare their comments, which should be published before the rating.
However, Member States would also be rated more frequently, because regular ratings together with clearer underlying data, would help to reassure investors and the States in question.
Mr Domenici is to present his draft report on 28 February 2012, the committee vote is planned for May, and the plenary one for July.
In the chair: Sharon BOWLES (ALDE, UK)