European Central Bank criticizes credit ratings amid debt crisis

16:58, June 02, 2010      

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The decision by credit-rating agencies to downgrade some countries' sovereign credit rating is unbeneficial to the current financial order, said senior officials of the European Central Bank yesterday.

Central banks of European countries are too reliant on those credit-rating agencies, which is unwise, officials said.

Bank of France president Christian Noyer said credit-rating agencies always make mistakes when rating some countries' sovereign credit like Greece.

Credit-rating agencies tend to downgrade some countries' sovereign credit rating when market panic occurs, despite the fact that the credit situation remains stable. For instance, the credit situation of the Irish government showed no signs of change in the last nine months, yet its credit rating still dropped.

Those agencies acquire information from the market without offering enough information to the market, Noyer said.

"This is a big problem for us because such things always happen at the wrong time," Noyer said.

Considering the fact that the varieties of collateralized mortgage bonds used by central banks of all nations in Europe are subject to related credit-rating systems, inappropriate rating results will inevitably influence the proper central bank behavior, which is unsatisfactory and should be rectified by lowering the dependence on credit-rating agencies, Noyer said.

Greece, Portugal, Ireland and Spain are countries that have suffered sovereign credit rating degradation in the last few months.

By People's Daily Online


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