The world needs more than three major credit ratings agencies because their actions exacerbate market swings, European Central Bank President Jean-Claude Trichet was quoted on Tuesday as saying. "The ratings agencies in general tend to amplify rises and falls in financial markets. You can see it still today very visibly. That goes against financial stability," he said in an interview with French daily Liberation. "It is probably appropriate not to continue to have a worldwide oligopoly of three agencies. But the underlying issue is to attenuate or cancel out this amplification to which the rating agencies contribute."
The world needs more than three major credit ratings agencies because their actions exacerbate market swings, European Central Bank President Jean-Claude Trichet was quoted on Tuesday as saying.
"The ratings agencies in general tend to amplify rises and falls in financial markets. You can see it still today very visibly. That goes against financial stability," he said in an interview with French daily Liberation.
"It is probably appropriate not to continue to have a worldwide oligopoly of three agencies. But the underlying issue is to attenuate or cancel out this amplification to which the rating agencies contribute."
So, national supervisors (that is, central banks) would be well in their rights to decree that the institutions they supervise are not required to use agency credit ratings to risk-weight their assets for regulatory capital purposes.
Banks can use their own ratings or market CDS spreads or they can read the entrails of chickens or consult Paul the Octopus... By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
