The Frenchman was behind proposals to force bond issuers to rotate credit rating agencies in a move that he believed would break the stranglehold of the big three: Moody's, Standard & Poor's and Fitch.
As the man responsible for the bloc's internal market and services, Mr Barnier is perhaps the most significant of many politicians who believe that the agencies' failure to spot risks in banking performance was a major factor behind the global economic crisis. But, EU finance ministers, MEPs and the UK financial services industry reacted with scorn to Mr Barnier's proposal. He wants to see the ratings agencies that companies and banks use to assess the strength of their bonds moved around every three to six years.
As companies tend to use two agencies on their bond issues, there are fears that this would simply mean replacing one with another of the big three, which have a hold on roughly 95 per cent of the market.
Mr Barnier believed that rotation would encourage the development of a second tier of agencies, but it is widely felt that few have the capabilities to evaluate more than a handful of extremely complicated bond issues. A market source described the proposal as "highly impractical".
Watering down the proposals will be a relief to the agencies, which have faced several reforms recently, including being forced to pay a percentage of turnover to cover the costs of the new regulator, the European Securities and Markets Authority.
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