Michel Barnier, the European internal market commissioner, admitted that he had to bow to objections from his fellow European Union commissioners but insisted the power to suspend ratings was never “the main measure” in his reform package.
Though Mr Barnier still announced proposals to transform aggressively the business model and methods of the big rating agencies, the last-minute decision to order more “technical work” on suspension represents a significant political blow.
Yet, in spite of the amendments, rating agencies remain deeply concerned by planned requirements for issuers of financial securities and bonds to rotate agencies and rules that give regulators the power to “pre-approve” analysis methods. “We strongly believe that the Commission proposal is damaging for the credit markets”, said Michel Madelain, Moody’s chief operating officer.
After emerging from a heated gathering of EU commissioners, Mr Barnier said that following “a long discussion” he had decided to postpone parts of the proposal because officials “needed more time to really go into the technical details of how such a temporary suspension could be implemented”. The former French foreign minister was also forced to give ground on provisions restricting big rating agencies from merging – one of several rules designed to break the “cosy oligopoly” dominating the industry. Alongside the extra work on mergers and suspension powers, Mr Barnier has ordered legal experts to examine whether additional rules are required to stop agencies giving some clients advanced notice of downgrade decisions.
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