EU mulls rating agency ban for debt-laden states: report

(FRANKFURT) - The European Commission is considering a possible ban on rating agencies from publishing their assessments of EU countries in difficulty, the Financial Times Deutschland reported on Thursday.

The European Union's commissioner for internal markets and services Michel Barnier has drawn up a draft proposal empowering the new European Securities and Markets Authority to "temporarily prohibit" agencies from publishing their analyses on a country's solvency, the newspaper said.

FT Deutschland said it obtained a copy of the confidential draft.

Barnier is concerned that the publication of a rating at an "inopportune moment" for a country when it was negotiating financial aid from the EU's bailout fund or the International Monetary Fund could have "negative effects for that country's financial stability and possible destabilising effects for the global economy."

Barnier told the French business daily La Tribune that the Commission "is exploring the possibility of prohibiting sovereign ratings in well-defined circumstances" for countries receiving support from the EU and IMF.

Politicians accuse rating agencies such as Moody's, Standard & Poor's and Fitch of totally misrepresenting the financial situation of individual countries, thereby only further intensifying the crisis.

A downgrade of its sovereign debt rating has enormous consequences for a country, pushing up its borrowing costs and its loan repayments.

Earlier this week, Moody's warned France that it may place a negative outlook on its cherished Aaa credit rating in the coming months as the government's financial strength "has weakened."

Barnier is to officially table his proposals by next month at the latest, and some amendments are possible, FT Deutschland reported.