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Christine Lagarde, the French finance minister, plans to push for registration of credit ratings agencies that want to operate in Europe when France takes over the presidency of the European Union in July.
Registration will not necessarily lead to direct regulation of Moody’s, Standard & Poor’s and their rivals in Europe, Ms Lagarde told the Financial Times, but her comments add to the pressure on the industry to overhaul its standards.
Ms Lagarde was speaking after the International Organisation of Securities Commissions (Iosco), the policy forum for the world’s leading financial watchdogs, published its beefed-up code of conduct for ratings agencies in Paris on Wednesday.
“I want to introduce the topic so that all European members can discuss how ratings agencies can be registered,” Ms Lagarde said.
“I’m not narrow-minded with regulation, regulation, regulation but I am obsessed with the stability of the financial markets and the due role of all the players.”
The new Iosco code comes in response to the industry’s role in rating the complex debt and mortgage-related products at the heart of the credit crisis.
It explicitly calls on the agencies to introduce new ratings for mortgage-backed bonds and other structured debt because of the perception that such debt behaves differently than traditional corporate or sovereign debt in times of stress.
The main ratings agencies have talked down this idea, which was also proposed by the Financial Stability Forum, a group of central bankers and supervisors.
Michel Madelain, the new head of Moody’s, told the FT this month that his agency would continue to give complex bonds traditional tags such as triple A.
But Michel Prada, head of the French regulator and chairman of Iosco’s executive technical committee, told the FT on Wednesday that international regulators would “seek and demand differentiation”.
“It might be different symbols, it might be otherwise but we are seeking differentiation that today doesn’t exist,” he said.
“When such a demand is made by the president’s committee of the US, by the Financial Stability Forum and by Iosco, I think it will be difficult [for the agencies] not to do anything about it,” he said.
Moody’s said on Wednesday that it implements the code of conduct drafted by Iosco through its professional code of conduct and that it would further change its code in response to Iosco’s changes where appropriate.
S&P is also looking at the changes. “We announced in February a proposal to add an identifier to all structured finance ratings in order to clearly distinguish them – we will shortly be consulting with the market on this,” it said.
By Jennifer Hughes in Paris and Paul J Davies in London