BRUSSELS — Just days before it was to propose sweeping regulations for credit rating agencies, the European Commission on Friday joined calls for an investigation into Standard Poor’s after the company erroneously sent out an e-mail suggesting that it had lowered the rating on France’s sovereign debt.
Michel Barnier, the commissioner responsible for financial regulation, described the episode as serious and said it strengthened his belief in the need for “strict and rigorous rules” to govern the ratings agencies and other financial actors.
The episode briefly upset markets on Thursday as it raised questions about the creditworthiness of France’s debt.
In a statement, Mr. Barnier said he did not want to discuss the case in detail but added that it showed “that in the current tense and volatile market situation, market players must exercise discipline and demonstrate a special sense of responsibility.”
He also said, “This is all the more important since we are not talking about just any market player but one of the biggest rating agencies, which, as such, has a particular responsibility.”
According to a draft of the plan scheduled to be introduced next week, European supervisory authorities would be able to temporarily prevent the issuing of ratings on countries in “a crisis situation.”
Investors would also gain a framework to take legal action against agencies “if they infringe intentionally or with gross negligence” on their obligations. A ratings agency would also have to disclose information about its rating methodologies.
To prevent conflicts of interest, the new regulations would impose limits on owners of more than 5 percent of one agency who wanted to invest in others.
On several occasions, European leaders have said the agencies worsened the debt crisis, most notably in July, when the president of the European Commission, José Manuel Barroso, criticized the decision to downgrade debt in his native Portugal to junk status.
As the European debt crisis starts to engulf Italy, President Nicolas Sarkozy of France has been striving to ensure that it does not spread to his country. A priority of his coming re-election campaign is ensuring that his country’s AAA rating stays intact, a challenge that has intensified as France’s share of the bill for helping to contain the crisis grows.
The loss of the top rating would also deal a serious blow to the euro zone’s rescue fund, which is seeking to increase its firepower.
After S. P. reported the mistake Thursday, France’s finance minister, François Baroin, demanded an investigation into “the causes and eventual consequences of the error.” Within half an hour, the nation’s stock market regulator said it would open an inquiry. It also notified the European financial market authority, which oversees “the professional obligations of the ratings agencies.”
S. P. attributed the message to a technical error and affirmed that the rating was unchanged. But the yield for France’s 10-year benchmark bond jumped more than a quarter point, to 3.48 percent, and the spread between French and German bonds of that duration reached 1.7 percentage points, a euro-era record, according to Bloomberg News.
The erroneous S. P. message went out just before 4 p.m. Paris time, and the correction was issued almost two hours later, after most European markets had closed.
Stephen Castle reported from Brussels and Liz Alderman from São Paolo, Brazil.
Article source: http://www.nytimes.com/2011/11/12/business/global/europe-to-propose-restrictions-on-ratings-agencies.html?partner=rss&emc=rss
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