LONDON, Oct 23 (Reuters) - A body representing Europe’s 9,200 listed companies said on Friday it wants all references to credit ratings stripped from European Union law, mirroring an initiative from the Obama administration in the United States.
Credit rating agencies have been accused of being too generous in their ratings of products that sank in value or became untradeable during the credit crunch.
“Rating agencies have argued repeatedly that their function is merely to provide ‘opinions’,” EuropeanIssuers, a campaigning body based in Brussels, said in a statement.
“Thus, although inaccurate and unreasonable credit ratings were a primary cause of the recent crisis, rating agencies remained largely free of any responsibility,” it said.
The EU has adopted a law that takes effect in 2010 that will require credit rating agencies to be authorised to operate in the 27-nation bloc and be directly supervised.
“However, the stronger supervision that will be achieved herewith does not remove the need to address the excessive reliance on ratings,” EuropeanIssuers said.
“We therefore urge the European Commission to continue the work it started when consulting the market on this subject in July 2008, and to come forward soon with concrete proposals to eliminate references to credit ratings in the European legislation,” it added.
Investors use ratings to decide on which shares or bonds to buy. Ratings also play a key role in how much capital banks set aside to cover risks.
The Obama administration has proposed that U.S. laws are purged of requirements to use credit ratings but earlier this week a U.S. congressional committee began watering this down. Obama’s proposal could be restored next week as the credit rating legislation proceeds through Congress. [ID:nN20436165]
Reporting by Huw Jones, editing by Ron Askew