Rapporteur Leonardo Domenici of the Socialists and Democrats argued the case for the European Parliament to assume an active role and to follow the direction suggested by the Commission; however, he was in favour of suggesting amendments to the proposal. On the one hand, the ratings should be defined as a pure information service to avoid that they are attributed with an excessive status. Apart from that, it had to be ensured that credit rating agencies would act completely independent, both from other agencies and from undertakings they rate. Besides the necessity to improve the quality of the ratings, Domenici also referred to the target of the Commission proposals to increase competition between the credit rating agencies, for example by applying the principle of rotation, according to which undertakings have to instruct different agencies to carry out their ratings. To avoid that only the same “Big Three” (Standard & Poor’s, Moody’s, Fitch) are checking the credit default risk, the Commission proposal also aims at enabling new smaller agencies to enter the market. Domenici agrees with this approach and suggests the additional option to lay down quantitative provisions on permitted market shares of the credit rating agencies.

The Committee paid special attention to the ratings of government debt. The rapporteur was in favour of issuing a ban on unsolicited government debt ratings. A suggestion, which also found the approval of Miguel Portas of the Left; however, he argued that a ban on unsolicited rankings of public debt would only work, if sanctions were involved. Jean-Paul Gauzès of the European People’s Party suggested with regard to rating government debt that the agencies would assess the creditworthiness of states in regular intervals and that these ratings would not be amended in between. After all, it was unacceptable that credit rating agencies would continuously amend their ratings in respect of States, thereby destabilising their economies.

The Commission proposal of a public European rating agency also became subject of the debate. Hence, the parliamentary groups of the Social Democrats and the Greens supported the idea that in future the creditworthiness of the Member States would only be assessed by one independent European body.
The parliamentary group of the Liberals and Democrats supported more competition between the credit rating agencies; however, it was not too keen on regulating the market shares of agencies, and in its opinion, the rotation principle should also be deleted from the Commission proposal.

Credit rating agencies should focus on their actual task, i.e. the assessment of the risk of default of undertakings as objectively as possible, commented Pascal Canfin of the Greens. However, making political recommendations, such as the flexibilisation of labour markets, was by no means part of the agencies’ area of responsibilities. The dangerous reliance of investors on credit rating agencies and their influence on the economic fate of entire economies will certainly occupy the European Parliament for some time to come.

Further information:

Draft report of Rapporteur Leonardo Domenici