Barnier fights for ratings agencies proposal
By Sarah Collins | Monday 02 April 2012
Internal market commissioner Michel Barnier is fighting to save a central in his latest proposal on credit rating agencies after EU finance ministers expressed widespread opposition to it. A move to force banks to rotate the agencies they use - proposed as part of the third review credit rating agencies regulation last November - has raised concern among ministers who say the ratings market is not large enough to make it workable. “Member states have great concerns about the present proposals about rotation,” said Danish finance minister Margrethe Vestager after a meeting on 31 March in Copenhagen. “There are very few credit rating agencies who have the capacity and the muscle to do the credit rating.”
The draft regulation asks banks and companies to rotate the agencies they engage to rate their products every three to six years, with a “cooling off” period between rotations. France supports the rule, but major European countries such as Germany and Spain, as well as large swathes of the industry, say it’s unworkable as there are only three major agencies - Moody’s Standard & Poor’s and Fitch - controlling 95% of the European market. There are also worries over the fact that many banks are required to obtain two ratings for risky products, a fact that further limits issuers.
Italian MEP Leonardo Domenici, who is reporting on the proposal on behalf of Parliament’s economic affairs committee, has upheld the rotation rule. While the rotation rule has not been scrapped, the Commission and Council say they are working on how to make it “applicable in the real world”. Officials say that little in the way of concrete proposals came out of the Copenhagen talks.
This is the second hurdle to hit Barnier in his bid to regulate agencies. He was forced to remove a clause banning ratings for agencies under EU bailout programmes after it was slammed by his fellow commissioners.
The news came just as new supervisory fees for agencies were introduced on 1 April, after a delegated regulation from the Commission (272/2012) came into effect. It means large agencies (those with revenues exceeding €10 million) will have to pay an annual percentage of their turnover in supervisory fees and a one-off registration fee of between €2,000 and €125,000. Foreign-registered agencies will have to pay a €6,000-a-year supervisory fee and €10,000 to obtain “certification” to operate in the EU. Agencies are also being asked to pay retroactive fees for 2011 of €500 a month, which applies only in the months after they were granted registration. The three largest agencies were granted registration in October last year. The fees are being charged to compensate the European Securities and Markets Authority (ESMA) for administration costs and “to provide for budgetary certainty for both ESMA and the credit rating agencies concerned,» the regulation says. ESMA was given direct supervision over agencies in 2010.