EU wants more oversight for rating agencies

BRUSSELS – EU governments said Tuesday that credit rating agencies may need more rules and more competition to help fix one of the problems behind the subprime credit crisis.

EU officials plan to put forward new rules in October and have already criticised rating agencies – Standard & Poor’s Corp., Moody’s Investors Service Inc. and Fitch Ratings – as playing a major role in triggering financial market turmoil because they underestimated the risk of complex investments.Some banks have racked up billions of euros in losses on investments based on US subprime housing loans to people with poor credit that emerged as far riskier than they were initially rated.Worried about new losses, many banks have now tightened borrowing conditions, making it more difficult and costly for companies or home buyers to get credit and exacerbating the global economic slowdown.EU finance ministers said in a joint statement that they agreed with EU regulators that Europe needs to do more to tackle problems because neither discussions between international supervisors or the financial industry have managed to come up with strong solutions.They said “the current initiatives do not fully address the challenges posed, that further steps are needed and that regulatory changes might be necessary.”They backed an EU registration system for rating agencies and said they would welcome “intensified competition by entry into the market of new players.”Their statement said it was of high importance to tackle transparency of the ratings process, the quality of the ratings, the accountability of the agencies and the risks of conflicts of interest on how the rating agencies are paid by the banks whose debt they rate.Nampa-APand Fitch Ratings – as playing a major role in triggering financial market turmoil because they underestimated the risk of complex investments.Some banks have racked up billions of euros in losses on investments based on US subprime housing loans to people with poor credit that emerged as far riskier than they were initially rated.Worried about new losses, many banks have now tightened borrowing conditions, making it more difficult and costly for companies or home buyers to get credit and exacerbating the global economic slowdown.EU finance ministers said in a joint statement that they agreed with EU regulators that Europe needs to do more to tackle problems because neither discussions between international supervisors or the financial industry have managed to come up with strong solutions. They said “the current initiatives do not fully address the challenges posed, that further steps are needed and that regulatory changes might be necessary.”They backed an EU registration system for rating agencies and said they would welcome “intensified competition by entry into the market of new players.”Their statement said it was of high importance to tackle transparency of the ratings process, the quality of the ratings, the accountability of the agencies and the risks of conflicts of interest on how the rating agencies are paid by the banks whose debt they rate.Nampa-AP