The Commission believed that the agencies, such as Fitch Ratings, Standard and Poor’s, and Moody’s, were too slow to heed the warnings from lenders that a potential crisis involving non-conforming mortgages was on the cards.
It believed the fact that the agencies only began downgrading mortgage-backed securities this Spring – months after the first warnings – meant investors continued to pump money into the sector, adding fuel to the fire.
An official at the Commission said: “If the agencies believe this is business as usual, they are wrong. The securitised non-conforming mortgage market would not have grown to the extent that it did without the favourable ratings given by some agencies.”
According to the Financial Times, Charlie McCreevy, the EU internal market commissioner, has scheduled a meeting of European securities regulators to decide on further action, while the US Senate said its financial services committee would hold hearings into the behaviour of agencies in September.
Mark Sismey-Durrant, chief executive of Heritable Bank, said:
“The issue will be whether the agencies missed the plot or rated the different bonds right. The market assumed there wasn’t any risk involved in portfolios so they took on BBB-rated deals for a greater return. I think risk has been allowed to build up and now the market is suffering from the consequences.”
