25th October 2011
I am outraged that under a proposal expected to be unveiled by the European Commission on 26th October
, the EU´s financial markets watchdog, the ESMA (European Securities and Markets Authority), is to be handed powers to stop publication of credit ratings of countries that need a financial rescue programme.
I have fought previous European measures to interfere with the independence of CRAs and this proposal is a classic case of shooting the messenger which is no more than an attempt to ban bad news and criticism. CRAs simply offer an opinion. However, markets do pay attention because, on balance, their opinion is carefully-considered and usually accurate.
I cannot imagine how a ban would work. After all, the CRAs are based in America, so for Europe to attempt to gag them would be both arrogant and fanciful.
CRAs are an integral part of the financial system and this ban is a clear attempt to stifle the free flow of financial information and to silence open economic debate. In the long run, that can only depress investor confidence further.
Of course what the Eurocrats really want is to have their own credit rating agencies. That way even Greece could have AAA rating. The only problem is the markets would never buy it.