Italian MEP backs curb on credit rating firms

AN ITALIAN politician wants to ban the publication of sovereign credit ratings for countries that do not want them.

Socialist MEP Leonardo Domenici hopes to enact curbs proposed last year by European Union commissioner Michel Barnier.

Mr Barnier proposed Europe-wide legislation that would tighten regulation of the credit ratings agencies and curb their power. But his proposals were abandoned before a draft law could be put before the European Parliament.

The credit ratings agencies have been heavily criticised for downgrading struggling eurozone countries facing a mounting debt crisis.

Some Italian politicians have claimed the agencies have exacerbated the debt problem by effectively increasing the cost of servicing it in the marketplace, since their ratings determine yields on government issued bonds.

“Only solicited ratings will be accepted,” said one source at the European Parliament close to Mr Domenici.

Credit rating agencies such as Standard & Poor’s and Moody’s are usually paid by debt issuers, such as companies and governments, to provide a public view of their creditworthiness as independent observers.