EC retaliation on rating agencies overrated
Monday 21 November 2011 - by firstname.lastname@example.org
"We have to accept the fact that credit rating agencies have been very useful," MEP Wolf Klinz tells Global Financial Strategy, breaking from a near-ritual of politicians slamming the agencies since the start of the financial crisis.
So with internal market commissioner Michel Barnier declaring a clampdown on the over-reliance of ratings and an increase in competition in an industry dominated by three firms - Moody's, Fitch and Standard & Poor's - what effect will the proposals have on the industry?
"Personally I think it would lead to a massive decline [in our business]," says Martin Slack, head of compliance at insurance-focused rating agency AM Best.
Slack's complaints centre on the mandatory rotation requirement; under the proposals, if an issuer is rated by a single agency, it will be allowed to do so for three years in a row, before a mandatory four-year cooling off period is put in place.
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