June 3, 2010
This story about possible EU regulations for rating agencies was published by EurActiv on 3rd June 2010.
“This is not the end” and “we all have to do better” were European Commission President José Manuel Barroso’s main messages at a press conference yesterday (2 June) announcing more EU measures to prevent risk-taking in the financial sector.
The Commission president endorsed several new measures that were unveiled yesterday, including attempts to put credit rating agencies under the EU’s thumb and an overhaul of corporate governance in the financial sector.
The European Commission has been busy drafting new rules for credit rating agencies which would see them answer to a new European body, the European Securities and Markets Authority (ESMA), to monitor the agencies’ rating models and methodologies (EurActiv 18/05/10).
This idea was announced by Internal Market Commissioner Michel Barnier last month, but Barroso yesterday restated the EU executive’s intention to examine the need for an independent European Credit Rating Agency after downgrades of Greek sovereign debt had sent markets into a tailspin.
In addition, a Commission inquiry is looking at how corporate governance at financial firms could provide the necessary checks and balances to prevent bankers from taking the kinds of excessive risk that brought many of them to their knees in 2008 and 2009.
Current suggestions would see board directors limited to seats on a maximum of three boards and risk committees introduced to vet the firms’ investment behaviour.
Commission officials said that during the crisis company boards were either not aware of the risks – in sub-prime mortgages for example – or were fooled by high and quick returns on investments.
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