May 5, 2010

EU Official Blasts Moves by Moody's and Standard & Poor's on Portugal and Greece

By James Kanter

(C) The New York Times 2010

BRUSSELS -- The European Union's financial services commissioner, Michel Barnier, vented his frustration with U.S.-based credit ratings agencies on Wednesday, May 5, as Moody's Investors Service put Portugal on review for another possible downgrade that could make it more difficult for the country to service its debt.

Barnier was briefing reporters ahead of his first official visit to the United States, where he was to meet the Federal Reserve chairman, Ben Bernanke, and Treasury Secretary Timothy Geithner. He will also meet with Wall Street titans like Lloyd Blankfein, the chief executive of Goldman Sachs, and Jamie Dimon, the chief executive of JPMorgan Chase.

Barnier complained that there were too few debt rating agencies, and he suggested that they were overly dominated by U.S. owners.

"There are not enough ratings agencies, not enough competition, and not enough diversity," he said. "Why should there not be an agency that is more European than those that exist today?"

A decision by Standard & Poor's, also based in the United States, to downgrade Greece's debt to junk status last month enraged EU officials, who questioned whether the ratings agencies were accurately assessing how likely it was that countries in the euro zone would default on their sovereign debts.

Barnier said it was "an open question" whether such an alternative agency should be BRUSSELS -- The European Union's financial services commissioner, Michel Barnier, vented his frustration with U.S.-based credit ratings agencies Wednesday as Moody's Investors Service put Portugal on review for another possible downgrade that could make it more difficult for the country to service its debt.

Mr. Barnier was briefing reporters ahead of his first official visit to the United States, where he was to meet the Federal Reserve chairman, Ben S. Bernanke, and Treasury Secretary Timothy F. Geithner. He will also meet with Wall Street titans like Lloyd C. Blankfein, the chief executive of Goldman Sachs, and Jamie Dimon, the chief executive of JPMorgan Chase.

Mr. Barnier complained that there were too few debt rating agencies, and he suggested that they were overly dominated by U.S. owners.

"There are not enough ratings agencies, not enough competition, and not enough diversity," he said. "Why should there not be an agency that is more European than those that exist today?"

A decision by Standard & Poor's, also based in the United States, to downgrade Greece's debt to junk status last month enraged E.U. officials, who questioned whether the ratings agencies were accurately assessing how likely it was that countries in the euro zone would default on their sovereign debts.

Mr. Barnier said it was "an open question" whether such an alternative agency should be ...(Continued on next page)

run by the private sector or by a public body.

During his trip, Barnier will quiz Blankfein on controversial financial transactions like credit default swaps as part of efforts to gather data before deciding whether or not to ban certain practices in Europe, EU officials said.

Another thorny issue for Barnier is regulation of hedge funds. In March, Geithner warned Barnier in a letter not to pass a law on hedge funds "that would discriminate against U.S. firms and deny them the access to the EU market that the currently have."

Barnier said Wednesday he would use his visit to Washington to establish a closer working relationship with Geithner and to reassure him that he was doing everything he could to pass a law that would be nondiscriminatory. But Barnier said that he would explain to Geithner that the final decision on legislation would be up to EU governments and the European Parliament.

Barnier may also deliver that message to top players in the private equity industry, like Henry Kravis, a co-founder of Kohlberg Kravis & Roberts, at a dinner on Sunday in New York.

On Monday in Brussels, a powerful committee in the European Parliament is expected to hold a preliminary vote on the proposed law on hedge funds, which could include rules that would raise the bar for access of foreign funds and fund managers to the EU market.

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