Europe’s planned regulation of ratings agencies should follow international standards: S&P’s

Standard & Poor’s (S&P’s) president Deven Sharma wants European policymakers to base their proposed system of supervising credit rating agencies on internationally accepted principles and standards to ensure ratings opinions remain comparable worldwide.
Speaking at the September 2008 Eurofi conference in Nice, France, Sharma said an enhanced oversight regime in Europe for ratings agencies could help in the process of restoring market confidence.
Ratings agencies came under fire for their role in the subprime mortgage crisis in the United States.
To be effective, however, the European model for overseeing ratings agencies “needs to be internationally consistent,” S&P’s said in a statement.
Sharma urged policymakers to focus any new supervisory system on compliance with the IOSCO code of conduct.
But in a June 2008 speech made in Dublin, Ireland, Charlie McCreevy, the European commissioner for internal market and services, said IOSCO’s new code of conduct has “proven to be a toothless wonder.”
In his speech, McCreevy outlined plans “to propose in October [2008] a registration and external oversight regime for rating agencies, whereby European regulators will supervise the policies and procedures followed by the credit rating agencies.”
Sharma said in September “there were concerns among ratings users that the European Commission’s current proposals for ratings agencies which envisage a new set of requirements specifically for the European Union may have unintended consequences for investors and debt issuers in the region.”
One of the biggest concerns, he said, is that supervisors may be placed in a position where they have to “second-guess the content of individual ratings.”