Ratings agencies must be able to work freely, says IMA

Top Quote The credit ratings agencies must be free to work independently without interference from political organisations. End Quote
  • (1888PressRelease) February 14, 2012 - This is the view put forward by the Investment Management Association (IMA) in its written submission to the Treasury Select Committee Inquiry, which is currently reviewing the role ratings agencies play and the impact they have in the financial sector.

    According to Michel Barnier, European Commissioner for Internal Market and Services, their impact is significant.

    In November, Mr Barnier said the ratings provided by these groups carry far more weight than a typical opinion, almost serving as a report on the perceived health of the economy.

    Mr Barnier therefore called for stricter rules for ratings agencies, insisting they should "be more transparent about their ratings and be held accountable for their mistakes".

    Yet Guy Sears, Director of Wholesale at the IMA, says the ratings agencies have a reputation for making "responsible and sensible decisions".

    He adds that the recent downgrades to countries such as Greece and France are a reflection of the economic situation in Europe, not a causal factor.

    "The agencies may be seen to hold disproportionate sway over global markets, not least because they are embedded in regulations such as Solvency II and CRD and in institutional client mandates," Mr Sears added.

    "Actions to reduce reliance on credit ratings agencies make sense, but the reality is they will remain an important part of the financial market infrastructure for years to come."

    His comments come as Laszlo Andor, European Union Commissioner for Employment and Social Affairs and Inclusion, warned that Europe is sliding into a second economic dip.

    Speaking to a Bloomberg On The Economy Podcast, Mr Lazlo says that plans are developing to restructure the way member states access funds in times of crisis, to take a more aggressive approach to achieving financial stability.

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