Agencies accused of conflicts of interest in sovereign ratings

Tim Wallace
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CREDIT ratings agencies are letting directors and communications staff have a say in sovereign ratings changes when they should not be, the European Securities and Markets Authority (ESMA) claimed yesterday.

The body argued this gives rise to potential conflicts of interest in setting the ratings of governments, potentially affecting their borrowing costs by changing the signals given to the markets.

Although the practice may not contravene the regulations around the ratings agencies, ESMA said it is concerned about the behaviour.

But the agencies denied there is a problem with their ratings.

“Moody’s is committed to complying with the European regulation and effectively managing any potential conflicts of interest as we continue to enhance the performance, processes and transparency that underpin our ratings,” said a spokesperson from Moody’s, one of the big three agencies.