16 December 2011

Treasury Committee announces new inquiry into credit rating agencies

The Committee invites written submissions of up to 3,000 words by Thursday, 2 February 2012, on the following points:

1. Is the methodology used by ratings agencies sound and transparent?
2. Do the rating agencies have the right incentives to do their job properly? Do they have conflicts of interest on either the corporate or sovereign side? If so, what is their cause? Do the agencies face adequate competition?
3. How accountable are the major credit rating agencies? What is the appropriate role for independent ratings agencies? Have the ‘big three’ agencies become too powerful?
4. What effect do rating agencies have on the efficient allocation of capital? How is investor behaviour affected by rating changes?
5. How embedded are agency ratings within the national and international regulatory frameworks? Is this changing under new regulatory frameworks being introduced?
6. Are the proposals put forward by the European Commission with respect to ratings agencies based on the right objectives? Will they achieve the Commission’s aims?
7. The sovereign rating methodology of agencies includes an assessment of national and international political factors. Do the agencies influence the political process in any way? What are the appropriate limits to credit rating agency political influence? For example, do credit ratings have an impact on national fiscal planning and budget planning cycles and therefore, potentially, economic growth paths? If so, is this appropriate?
8. Have recent downgrades of sovereign debt by the credit rating agencies (e.g. the downgrades of the United States and a number of eurozone sovereigns) illustrated any of the issues raised by these terms of reference? Are the downgrades supported by the evidence?

Notes on submission of written evidence

The deadline is 12 noon on Thursday, 2 February 2012.

Press release

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