The House of Lords EU Economic and Financial Affairs and International Trade Sub-Committee has launched its new inquiry into credit rating agencies and EU sovereign debt.
Credit rating agencies came under scrutiny during the financial crisis and their downgrading of the debt ratings of Spain, Greece and Portugal added to the euro area’s recent economic difficulties. The European Parliament subsequently called for a new European ratings foundation as a counterweight to the influence of the three large US based agencies.
Against this backdrop, the Committee will examine questions, including:
- Does the credit rating market suffer from being dominated by three major firms?
- Should a European credit rating agency be established?
- Should rating agencies be required to give governments advance warning before publishing their sovereign debt ratings?
Committee Chairman, Lord Harrison, said: “sovereign debt ratings have a huge influence not just on the economies of individual countries but on the whole EU. We saw this when market confidence in the euro area plummeted after the debt ratings of Spain, Portugal and Greece were downgraded. Yet sovereign debt is rated by a very small number of mainly US firms. We think this warrants closer attention.”