Credit rating agency rules must be changed further to make the
sector more diverse, cut over-reliance on ratings and to deal with remaining conflicts of interest, the European Commission has said.The statement came after Moody's Investors Service cut Spain's sovereign debt rating one notch to Aa2 and warned of further downgrades, estimating that restructuring savings banks will cost more than double the government's 20bn euro forecast.
Also, Moody's cut Greece's credit rating by three notches earlier this week, citing an increased default risk, to B1 from Ba1 -- lower than Egypt -- raising the price of insuring Greek debt against default and Greek bond spreads over German bunds.
"The last few days highlight once again how important a more and better regulated environment for ratings are," Economic and Monetary Affairs Commissioner Olli Rehn and Internal Market Commissioner Michel Barnier said in a joint statement.
Greece yesterday asked EU and ECB leaders to urgently address problems created by rating agencies for countries struggling with debt crises.
Such "unjustified" moves by rating agencies can hinder Greece and other troubled countries from regaining access to financial markets, its finance minister said in a letter to Eurogroup chairman Jean-Claude Juncker, EU monetary affairs commissioner Olli Rehn, EU's financial services chief Michel Barnier and ECB President Jean-Claude Trichet.
"Rating agencies must be regulated effectively at a European and world level," George Papaconstantinou said in the letter, which was released by the Finance Ministry.
"This is an issue that must be dealt with urgently by eurogroup and ecofin."
"Such unjustified and imbalanced decisions could become self-fulfilling prophecies.
"They can hinder the course of Greece and other countries in a similar position as we try to regain access to international markets."
Papaconstantinou said Moody's downgrade revealed the "distorted incentives and lack of accountability" on the part of rating agencies and slammed them for missing the signs of the 2008 financial crisis.
