UPDATE 1-EU lawmakers back ratings agency registration

* EU lawmakers back mandatory rating agency registration

* Negotiations to start with EU states on final deal

* Pan-EU watchdog CESR to be registration body

By Huw Jones

LONDON, March 23 (Reuters) - European Union lawmakers voted strongly in favour of mandatory registration and supervision of credit rating agencies on Monday as policymakers seek to protect investors better after the worst market turmoil in decades.

The European Parliament's economic and monetary affairs committee meeting in Strasbourg, France, voted 21 in favour, seven against with four abstentions on a reform drafted by EU Internal Market Commissioner Charlie McCreevy.

"There is a broad consensus in the committee," Jean-Paul Gauzes, the French centre-right lawmaker who is steering the measure through parliament, said just ahead of the vote.

The sector has been criticised for failing to warn investors about risks in subprime-related products and the measure dovetails with a G20-led global approach to introducing direct supervision of credit ratings agencies.

EU states and parliament have the final say on the measure. It will affect companies such as Standard & Poor's (MHP.N), Moody's Investors Service (MCO.N) and Fitch Ratings (LBCP.PA).

EU states reached a deal among themselves earlier this month and the two sides start negotiations on a joint deal on Tuesday for adoption by parliament in April.

"There are some differences between us. I hope that we will find an agreement," Gauzes said.

McCreevy has said ratings agencies failed to "sniff the rot" at the heart of securitised products that turned toxic in the credit crunch.

The products were rated highly but quickly became untradeable as underlying home loans defaulted in the United States, forcing banks to make huge write-downs .

Parliament altered McCreevy's draft measure by making a pan-EU committee made up of national securities regulators from the bloc's member states the registration and supervisory authority.

"We are looking for a single European supervisor for registration and supervision," Gauzes said.

EU states in their preliminary deal said national authorities should be responsible for these tasks.

A move by some lawmakers for more extensive internal rotation of agency staff than McCreevy had suggested, failed. Rotation is seen as a key tool to avoid analysts from becoming too close to the industry sector they rate.

The United States has criticised McCreevy's plan for its "extraterritorial" effects as it would directly affect how ratings agencies went about their business outside the EU. Two of the three top agencies, S&P and Moody's, are U.S. companies.

Lawmakers, along with EU states, have made changes so that ratings issued by agencies based outside the 27-nation bloc can be recognised for use by EU investors.

In the United States there is no mandatory registration but regulators introduced rules in December to prohibit credit raters from rating their own work, and to ban employees who help determine a credit rating from negotiating any fees. (Reporting by Huw Jones; editing by Richard Chang)