Companies slam EU lawmaker move on rating agencies


LONDON |
Thu Nov 18, 2010 11:11pm IST

LONDON (Reuters) – A bid by EU lawmakers to increase competition and transparency among credit rating agencies would backfire and damage companies, bodies representing debt issuers and corporate treasurers said on Thursday.

The European Parliament’s economic affairs committee votes on Monday to centralise supervision of the sector from January under the new European Securities and Markets Authority.

Some lawmakers want to go a step further and force ratings agencies to publish on a protected website all details used to compile a rating on any financial instrument.

Rival ratings agencies could then use the information to offer unsolicited research.

“We don’t see an advantage to this,” said John Grout, policy and technical director at the Association of Corporate Treasurers.

“We see risk of great harm and the reason is it will have a chilling effect on information that companies are prepared to disclose to agencies,” said Grout, whose organisation lists companies such as appliances maker Dyson, miner Rio Tinto and accountants PricewaterhouseCoopers as members.

European Issuers, an organisation which represents most of Europe’s 9,200 listed companies, is also concerned.

“This poses a problem. We are issuers of corporate bonds and basically the information is confidential and price sensitive,” said Paulo Pina da Silva, policy adviser for European Issuers.

The European Commission drafted the reform but proposed that information used for compiling ratings only on securitised products would be posted, mirroring SEC Rule 17 g-5 introduced in the United States in June.

EU states, which have joint say with parliament on the measure, want all references to posting details of any type of ratings dropped altogether.

They are concerned it could harm recovery in securitisation which banks will need to help plug a huge funding gap and argue the U.S. experience should be monitored first.

UNINTENDED CONSEQUENCES

Companies hope that if the amendment is approved, member states would later persuade lawmakers to change their minds by the time the reform is voted in full parliament in December.

Standard Poor’s, one of the world’s “big three” agencies, has already used the new U.S. rule to publish unsolicited research on deals it was not mandated to rate.

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