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Michel Barnier, the commissioner responsible for the proposal, is mounting a last-ditch attempt to increase the clout of regulators so that they can suspend any sovereign rating within the EU – a broad scope that applies to countries such as France and Italy in prescribed circumstances. But Mr Barnier faced a backlash from at least five other European Union commissioners on Monday – including representatives from the UK and Sweden – who are concerned that such restrictions could backfire and damage fundamental rights.
Some officials familiar with the negotiations expect a compromise to emerge where ESMA, the European regulator of credit rating agencies, would only be able to ban ratings if countries were still negotiating bail-out programmes. Even this more tightly-prescribed power is vehemently opposed by rating agencies and many big investors, who argue the measure will distort market behaviour and accelerate a sell-off in a country’s debt.
Other observers argue suspending ratings would be impractical, as the EU would find it difficult to stop US-based analysts offering their opinion on sovereign ratings, which are often a key component of corporate ratings.
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