Shooting the Messenger

1994: Il Postino - Michael Radford

As if to add weight to the piece I wrote about the blame game and needing someone to divert responsibility to, this morning's news is that last night European ministers believe that a change to the significance and dominance of the big three ratings agencies is required. If ever there was a case of not liking the message, so shoot the messenger, this is probably it. I certainly agree that far too much attention is paid to ratings agencies now and their views (which are often wrong) trigger reactions from investors -  but no more than most other news and this is now all part of the normal backdrop of a media frenzy to have something to report, whatever the consequences and an investing public that pay far too much attention to short-term "noise". Good investing requires a long term outlook and sound philosophy.

The Economic and Monetary Affairs Committee called for there to be less reliance on the credit ratings of the big three ratings agencies (Fitch, Moody's and Standard & Poor's) and limit their direct impact on countries' borrowing costs. Conflicts of interest between agencies and the companies that they assess should be addressed, eg by introducing civil liability for ratings, they added. This is frankly old news and something that could have and should have been actioned once it became clear that the ratings agencies seriously messed up in their assessments pre-crunch. Numerous groups have been calling for "clear water" between the agencies and those that they rate.

Anyway, now Mr Domenici (an Italian) is going to attempt steer the proposal through the Parliament and will "scrutinise the three key issues in depth". These are firstly competition, secondly conflicts of interest and thirdly greater transparency in sovereign debt rating. A draft report will be presented on 28 February 2012 with a committee vote planned for May. If you would like to email Mr Domenici with your thoughts you can do so, such is the availability of information on the EU website. British interests (yes contrary to media and political nonsense we still have them) are represented by Sharon Bowles, Arlene McCarthy, Godfrey Bloom, Syed Kamall, Peter Skinner, Kay Swinburne, Marta Andreasen, Vicky Ford and Ashley Fox. That's nine British MEPs on the committee.

This "new initiative" comes on the back of our own Treasury Committee announcing on Friday last week, that it is to begin an enquiry into Credit Ratings Agencies. The Committee has invited evidence and information from interested parties to address specific issues (mainly independence) by 2nd February 2012 - with a maximum of 3,000 words.

DT