One of the most significant parts of the European Commission’s proposal to clamp down on the credit-rating industry could be scrapped after some finance ministers warned that it may be unworkable.
At their meeting in Copenhagen on Saturday (31 March), several finance ministers spoke out against the ‘rotation rule’, which would force companies that have credit rated to regularly change the agency they use.
Click Here: Cheap France Rugby Jersey
Michel Barnier, the European commissioner for the internal market and services, had made this an important part of his plan for a new law on credit-rating agencies, which is currently being discussed by member states and the European Parliament. The intention is to increase the level of competition in the rating agency market – currently dominated by three agencies – as well as to cut reliance on ratings and eradicate potential conflicts of interest.
The UK and Germany were among a group of countries that spoke out against the proposal to force rotation every three-to-six years.
However, an EU official said that ministers had not completely ruled out bringing in rotation, but were looking at ways to “tweak” it. This could include changing how often agencies would have to be rotated, how many rotations would be needed, and how the new rules would be phased in.
“There is consensus over the goals [of rotation],” the official said. “Rotation is not easy to organise in an effective way, but it is one of the ideas out there. Some ideas [discussed by ministers] build on rotation, and then there are other ideas. Everyone agrees that the status quo is not tenable.”
Margrethe Vestager, Denmark’s economics minister, who chaired the Copenhagen meeting, said EU member states had “very great concerns” about the rotation proposal.
Barnier, who also took part in the meeting, said that he was “open” to different solutions. The Commission will now work with the Parliament and Council of Ministers in search of a solution by the summer.