Regulators slam EU credit rating reform plan

Elizabeth Fournier
REGULATORS have warned that plans for European reforms of credit rating agencies (CRAs) could have unintended consequences, as proposals emerged yesterday to give the EU new powers over the controversial bodies.

Giving evidence at the opening of the Treasury Select Committee’s enquiry into CRAs, the Financial Services Authority’s David Lawton said that forcing companies to rotate the agency they use every year could lead to a lack of continuity in ratings.

His views were echoed by Mark Hyde Harrison, chairman of the National Association of Pension Funds, who said rotation would “add costs to companies to get [the agency] up to scratch, and may create instabilities”.

A report yesterday proposed new EU powers that could include banning sovereign credit ratings if countries do not want them. But other EU lawmakers said that would be a step too far, and would not stop the financial sector relying on ratings.