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Europe to crack down on credit rating agencies

THE EUROPEAN Commission stepped up its efforts to crack down on credit rating agencies (CRAs) yesterday, by tabling legal amendments to the supervision and transparency of CRAs operating in the EU.

The Commission also launched a public consultation on corporate governance, as part of its “final push” to reform financial services in the EU.

Under the proposed rules, a new European Securities and Markets Authority would be given powers to request information, launch investigations and perform on-site inspections of CRAs.

These firms would also be obliged to share information with other agencies, to promote transparency and allow unsolicited ratings.

The rules will not come into force until 2011, pending approval of the EU Parliament and Council of Ministers.

Many EU heads of state, including German chancellor Angela Merkel and French president Nicolas Sarkozy, have called for tougher rules on CRAs. They will need to agree on a detailed plan before it is presented to the Toronto G20 summit on 26 June.

A Standard & Poor’s spokesperson, Martin Winn, said that the rules will “play an important part” in regaining trust.