European Central Bank (ECB) policymaker Christian Noyer hit out at credit rating agencies yesterday, saying central banks were too dependent on their judgments.
The dependence on rating agencies is “absolutely unsatisfactory,” Noyer, a member of the ECB’s governing council, told a Bank of Korea conference.
The agencies have been accused of compounding problems by belatedly downgrading ratings of countries.
This is particularly a problem with sovereign debt because it affects the types of bonds that central banks are allowed to use as collateral for lending, said Noyer, who is also the governor of the French central bank.
Agencies have proved themselves “plain wrong” in judging sovereign-credit risk, slashing ratings on Greece and other countries as markets panicked, when there was no change in the credit-worthiness of their governments, he said.
They are “simply not giving information to the market but taking information from the market,” Noyer said.
“For us, of course, it’s an enormous problem because it always happens at just the wrong time,” he added.
Over the past several weeks the credit ratings of Greece, Portugal, Ireland and Spain have been downgraded by agencies due to concerns over their debt levels, leading to a sell-off in the euro and sending stock markets plummeting.
The agencies downgraded Ireland’s sovereign ratings even though there had been no change in its credit-worthiness for three to nine months, he said, calling for research on how to reduce dependence on them.
Meanwhile, French Budget Minister Francois Baroin said yesterday that France runs no risk of losing its top quality credit rating.
On Monday the minister had said that the target of holding on to the AAA rating was under strain and that this laid down conditions in part on the economic policy which France wanted to have.
“There is no doubt, there is no risk,” he said yesterday, insisting that France was committed to policies which would ensure it retained its AAA notation.
Baroin said on French BFM radio: “France’s signature [rating] is one of the most advantageous today, it is a safe-haven signature. We saw this at the time of the Greek crisis.”
Baroin said that the strong credit rating “enables us to finance our projects.”
He continued: “And we will keep that. There is no doubt, there is no risk, there is no question about it because we have resolutely entered a new era of controlling public finances for the next three years and thereafter.”
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