Standard and Poor's, Fitch and Moody's - the "Big Three" credit rating agencies (CRAs) that score EU government debt - could face further action after failing to fix "inadequate practices from the past".
The European Securities and Markets Authority (ESMA) published the results today of its probe into how the three agencies compiled ratings on sovereign bonds between February and October this year.
The regulator said it has not determined whether any of its findings constitute a breach of the CRA Regulation, and "may take action as appropriate in due course".
ESMA said it had found deficiencies when it came to confidentiality, conflicts of interest, a lack of adequate resources and staff being used, and the delays seen in the publishing of ratings. It said it has required "remedial action plans" to be put in place by the agencies to address the problems.
The watchdog's chair, Steven Maijoor (pictured), said the shortcomings uncovered "could pose risks to the quality, independence and integrity of the ratings and of the rating process." He went on:
The focus on the sovereign rating process in this investigation stems from their increased volatility over the past few years, the importance of sovereign ratings from a credit market and financial stability perspective, and their impact on other rated entities and products.
The impact which changes in these ratings can have on financial markets, and sovereign states, can be significant. Therefore, it is imperative that users can have confidence that the CRAs have adequate systems and controls in place to ensure that ratings are rigorous, free from conflicts of interest and timely.