Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-06-15-Speech-2-457"
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"en.20100615.28.2-457"2
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"Mr President, the recent attack by European leaders on credit rating agencies, regarding the timing and degree of downgrades being meted out to countries’ sovereign debts, may be seen by some as somewhat exaggerated.
However, the failures of credit rating agencies are now well known – I think there is general agreement from all sides of Parliament on this. They have given high ratings to bonds that subsequently defaulted. Now that the tide has turned, and the economic outlook across Europe remains bleak, they are guilty of overreacting in the opposite direction. Not even an impressive and unprecedented EUR 750 billion package seemed to convince them. Having said that, we have to be careful when reacting to this, and not appearing to shoot the messenger just because he brings bad news.
One thing is for sure: whether they overrate or underrate a financial product, the influence of the rating agencies on global financial markets is enormous. In effect, they can and do hold a country and its people to ransom, including workers and pensioners. This cannot but have political implications, which need to be addressed.
We need to understand how rating agencies create and sell their ratings. The arrangement between the security issuer and the agencies is an obvious problem. Secondly, there is the question of the number of agencies themselves and the degree of effective competition between them. If banks and financial institutions are to be regulated, as they must be, why should rating agencies be treated any differently, especially given the oligopolistic structure of the rating agency market?
The causes of the problem, including the conflicts of interest, are therefore clear. The solutions, however, appear less straightforward, so let us keep level-headed and find the right solution, being careful not to overreact with serious consequences."@en1
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