Credit Rating Companies Fall Short of EU Rules, Regulator Says

Credit rating companies are falling short of standards set by European Union, the bloc’s chief markets regulator said.

The regulator highlighted failings in the “process of disclosure and implementation of changes” to the methodology used to rate the creditworthiness of Europe’s banks, the Paris- based European Securities and Markets Authority said in an e- mailed statement today.

“Considering the continued importance of credit ratings in financial markets it is extremely important that credit rating agencies identify and remedy those issues in their businesses which may undermine the independence, objectivity and the quality of credit ratings,” Steven Maijoor, ESMA’s chairman said in the statement.

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings registered with ESMA in 2011, becoming directly supervised by a single EU regulator for the first time. The U.S. Justice Department last month filed a civil complaint accusing McGraw-Hill Cos.’s and its S&P unit of three types of fraud, the first federal case against a ratings company for grades related to the 2008 financial crisis.

ESMA focused its review on the links between bank and sovereign credit ratings and found that for one or more of the credit ratings companies, “the information used for certain rating actions referred to significantly outdated data,” according to the regulator.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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