mr president it was clear very early in the financial crisis that there had been huge failings on the part of credit rating agencies
hence it was one of the first things addressed by the eu last year
updating the directive to cast responsibility for the eu activities of the predominantly us-based agencies is to be welcomed as a move to monitor their activity more closely here in europe
credit rating agencies are extremely powerful organisations and have the ability to move the markets with a change of rating
their independence needs therefore to be ascertained and maintained at all times
however any rating decisions that trigger a flow of billions of euros should not come as a surprise to the market
for example credit rating agencies should publish their ongoing stress tests and scenario analyses so as to improve market transparency and minimise shocks
however we must remember what it is credit rating agencies are set up to do to assess the risk of default of an entity be it a product or a corporation especially a publicly listed company including financial institutions or even sovereign states
in the same way that we should not blame credit rating agencies for responding to legitimate information on the state of our banks we should not use them as an excuse for the market's reaction to the dire state of our public finances
although monitoring their activity more closely is to be supported a more critical proposal needs to be framed around a different question namely why have the markets investors corporations and sovereign states relied so heavily on credit rating agencies rather than conducting adequate due diligence and collecting information for themselves
in particular why is the credit rating market dominated by three names when there are many more available to the marketplace
when we have answered these broader questions then the way credit rating agencies are held to account will become more meaningful
with their great power and influence in the markets there should also be significant responsibility
