In criticizing rating agencies, Eddy Wymeersch, chairman of the Committee of European Securities Regulators (CESR) said at the very least they (European regulators) will now have to introduce tougher codes of conduct. “It is still not clear in the European Commission whether there will be laws on credit rating agencies. EU Internal Market Commissioner Charlie McCreevy has to decide. That is his decision,” Wymeersch said. “We are fed up with the rating agencies. Their performance was somewhat puzzling,” Wymeersch told a Reuters Funds Summit in Luxembourg and added “some of the ideas being looked at included “naming and shaming” and reprimanding ratings agencies for any unacceptable behavior. CESR is an assembly of national securities watchdogs from the 27 EU states. Mr. Wymeersch is also the head of Belgium’s banking and insurance supervisor, CBFA. Source: Reuters http://summitnotebook.reuters.com/)
BIIA Opinion: Rating agency bashing is not a novelty, however it has been some time since the public had to listen to such diatribe. Perhaps regulators are driven by a guilt complex of not having looked at the loan process preceding the creation of the financial instruments which are at the center of the crisis. Perhaps the 27 regulators appear to have forgotten that ratings are benchmarks and not statements of guarantees. Given the seriousness of the credit crunch a more levelheaded approach and constructive criticism would be advisable.
A serious effort is underway by rating agencies to make rating processes more transparent and to educate users. S&P’s President Deven Sharma gave a constructive view of how to overcome the negative perceptions of the rating agencies in a recent interview with the Financial Times.
Two of his statements are quoted on page 8 in this newsletter.