EU watchdog offers banks hope on U.S. ratings

LONDON Wed Feb 8, 2012 6:51am EST

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LONDON (Reuters) - The European Union's top markets regulator signaled on Wednesday that credit ratings from the United States were close to satisfying EU rules, without which banks would face the cost and upheaval of finding alternatives.

The European Securities and Markets Authority (ESMA) must decide by April 30 if the rules for compiling ratings in the United States are as strict as those in the 27-nation bloc. If not, banks will have to obtain alternative ratings, a costly and time-consuming process.

"We fully understand how important it is that we get to a solution here," ESMA Chairman Steven Maijoor told a conference organized by the Association for Financial Markets in Europe, a banking lobby.

"We know the U.S. is very far ahead, and very far with getting close to the European requirements in this area," Maijoor said.

ESMA has to reassure itself that the U.S. system for regulating credit rating agencies is "broadly similar" and that U.S. supervisors will fully cooperate with EU counterparts in exchanging data on ratings, he added.

ESMA authorizes and supervises all rating agencies in the EU, including the "Big Three" -- Moody's, Standard & Poor's and Fitch.

The watchdog has just completed its first review of the main agencies and will publish a report in April.

Ratings agencies face intense scrutiny after giving top ratings to the toxic mortgage-backed derivatives at the heart of the global financial crisis. They have also drawn the ire of many EU policymakers for downgrading the ratings of euro zone countries at sensitive times in recent months.

A third EU law in as many years is now being approved, and there is a push by some lawmakers to ban the publication of sovereign ratings if a country is being rescued.

Maijoor sent his second warning to policymakers in as many weeks not to interfere in opinions the agencies issue on debt.

"While we can inspect such issues as the credit rating agencies' internal controls, transparency and independence arrangements, we cannot interfere with their ratings," Maijoor said.

"Like all ratings, sovereign debt ratings can only be credible and play their proper role in financial markets when they are issued independently from the rated entity," Maijoor said.

(Reporting by Huw Jones; Editing by Will Waterman)

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