EU: Credit Rating Agencies

Lord Eatwell Excerpts

Monday 3rd October 2011 Lords Chamber

[Lord Sassoon]

I agree with my noble friend. I know that he was a member of your Lordships’ sub-committee which produced an excellent report published in July. Among its conclusions is that:

“The criticism that credit rating agencies precipitated the euro area crisis is largely unjustified; their downgrades merely reflected the seriousness of the problems that some Member States are currently facing”.

[Lord Eatwell]

My Lords, the noble Lord, Lord Sassoon, has made it clear on several occasions that appeasement of the private credit rating agencies is a central plank of government policy. What reconsideration of that policy have the Government undertaken, given the point just raised by the noble Lord, Lord Hamilton? When the United States was downgraded, the rate of interest in the US did not rise, which the noble Lord, Lord Sassoon, on several occasions predicted would be the relationship between credit rating and interest rates; quite the contrary, interest rates in the United States fell.

[Lord Sassoon]

If the noble Lord means by appeasement what the Government want to do in terms of reducing the over-reliance of the market on credit rating agencies, getting away from being hardwired into arrangements that drive the debt markets, and what we want to do through increasing transparency and disclosure by the credit rating agencies, increasing competition and seeing more new entrants into the market, that is what I mean by appeasement, but I do not think it is what he means by it. We want a much more healthy market. We are going about it through a series of practical suggestions in discussion with our European partners in advance of the next proposals from Brussels.