[Debate] Barnier passes timid curbs on rating agencies - EU
Riaz K Tayob
riaz.tayob at gmail.com
Wed Nov 16 20:30:21 GMT 2011
[When Africans like Mbeki complained, they were told to shut up and lump
it... this shoe does fit rather tightly now though...]
Barnier passes timid curbs on rating agencies
16 November 2011
La Tribune, 16 November 2011
“Too little, too late”: the ratings agency reform package presented on
14 November by European Commissioner for Internal Market and Services
Michel Barnier, the third in three years, does not satisfy La Tribune.
Contrary to expectations, Barnier dropped a key proposal to suspend
ratings of countries negotiating bailouts.
According to the business daily, Barnier’s Scandinavian colleagues, who
were “shocked by the very idea of a ban on issuing ratings, which they
deemed to be an infringement of freedom of speech, were behind
opposition to the measure.” For journalist Jean Quatremer, Michel
Barnier was forced to back down in the face “frenzied lobbying by the
The Commissioner’s text aims to reduce financial institutions dependence
on ratings by the world’s three biggest agencies, Standard & Poor's,
Moody's and Fitch: “The goal is to oblige investors to conduct their own
evaluations, to create a European Ratings Index (EURIX) and to introduce
forced rotation of ratings providers or the simultaneous taking into
account of several ratings so as to avoid automatic investment decisions
in the wake of downgrades,” notes the daily.
“The recurrent issue of a European ratings agency did not re-emerge,”
remarks La Tribune, “much to the disappointment of socialists and even
certain German liberals in the European parliament,” an institution that
will also adopt the text along with the Council of Ministers.
On 14 November, parliament voted to curb short selling:
...transactions that entail the sale of an asset in advance of ownership
in the hope of buying it in the future at a lower price will still be
permitted but traders will now have to prove that they have a reasonable
expectation of being able to borrow the shares they have sold at the
moment of delivery which will have to occur sooner.
The European Financial Markets Authority (EFMA) will also have the power
to ban short selling in the event of widespread market tensions, which
will prevent a repeat of uncoordinated decisions by Europe’s 27 member
states like those that were taken last summer when the markets were in a
state of crisis. Sovereign debt trading will be the subject of special
attention and highly speculative transactions will be prohibited.
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