An EU lawmaker is planning to propose rules prohibiting the publishing of sovereign credit ratings for countries that do not want them, according to a draft proposal seen by Reuters on Wednesday.
It is not clear how such a ban would work in practice, as the proposed law would only apply to EU countries and not to financial markets outside Europe.
In addition, any attempt to enshrine a ban in EU law would likely face considerable opposition from investors who use ratings when choosing what debt to buy and sell.
Politicians have criticised the credit raters for downgrading struggling European states at delicate moments of the debt crisis, thereby exacerbating efforts to contain their soaring borrowing costs.
Such moves led to calls for the raters to be prevented from giving their opinion on the creditworthiness of states receiving financial aid.
Last year, Michel Barnier, the EU commissioner in charge of financial regulation, proposed legislation to overhaul regulation of the rating agencies.
However, the idea of stopping ratings from publishing their views on certain countries was abandoned before the draft law reached the European Parliament.
Now, Leonardo Domenici, an Italian socialist in the Parliament, wants to resurrect such curbs, according to the draft proposal.
"Only solicited ratings will be accepted," said one source at the European Parliament close to the dossier.
Credit rating agencies such as Standard & Poor's and Moody's are usually paid by debt issuers, such as companies and governments, to provide a public view on their creditworthiness.
But the agencies sometimes rate countries even when not asked to, because this helps calculate the riskiness of a company or bank with links to those states.
Preventing them from publishing their views would be highly controversial. The EU's 27 member states, whose backing is required for such provisions to be made law, may decline to give their blessing.
Discussing curbs is a long way from them becoming law.
The first drafts of new EU laws are written by the European Commission, the EU's executive. Then the European Parliament and EU countries can rewrite the drafts. In the past, the Parliament has hardened financial regulations, such as those on bonus payments to bankers.
But not all attempts to toughen up draft laws are successful and many get bogged down in disagreement within the Parliament. Even if they do win broad backing among lawmakers, EU member countries often water them down later.
Banks currently rely on the credit ratings of assets, such as packages of loans, in deciding how risky they are and how much capital should be set aside to cover them.
Rating agencies have already been subject to stricter policing this year, since the establishment of a new agency to supervise them in the EU.
ReutersGüncelleme Tarihi: 09 Şubat 2012, 11:14