McCreevy attacks credit rating agencies

Charlie McCreevy, European commissioner for internal market and services,
launched a scathing attack on credit rating agencies in a hard-hitting speech at
the annual Association of European Journalists lunch in Dublin yesterday,
published on

He said that, as one of the biggest capital markets in the world, the EU
should take a leading role in pushing through a comprehensive approach to
international financial reform.

‘The global financial architecture has been weak,’ he said. ‘We need… a
strengthening of international regulatory standards, international cooperation
between financial supervisors, multilateral macroeconomic surveillance and
crisis prevention and a beefing up of international crisis and resolution

‘Both the Financial Stability Forum and the IMF must be strengthened and
their effectiveness and legitimacy must be improved.’

He attacked the issuer-pay rating agency model as not fit for the purpose and
said the trust placed in many credit ratings to determine capital requirements
had now been shown ‘to be wholly misplaced’.

‘Last July, the US Securities and Exchange Commission found that leading
credit rating agencies improperly managed conflicts of interest and violated
internal procedures for the allocation of ratings’, he said.

‘Against this background, I am flabbergasted at the naivety of anyone who
thinks these same credit rating agencies should be trusted to abide by a
non-legally enforceable voluntary code of conduct drawn up under palm trees – a
code that has proven itself to be toothless, useless and worthless time and time
again. Fool me once, shame on you. Fool me twice, shame on me.’

Further reading:

EU poised to regulate Hedge Funds

EU regulatory oversight ramped up to ‘absurd’ levels

Related reading

Fiona Westwood of Smith and Williamson.