Noyer Attacks Rating Agencies

September 27, 2010 by · Leave a Comment
Filed under: EBC, NRSRO, The Rating Agencies 

When speaking in Seoul, South Korea, European Central Bank (ECB) policymaker Christian Noyer complained that central banks were too dependent on the jugments of credit rating agencies.

Noyer, a member of the ECB’s governing council and governor of the French central bank, told a Bank of Korea conference that the dependence on rating agencies is “absolutely unsatisfactory.” He explained that it was particularly a problem with sovereign debt. The types of bonds that central banks are allowed to use as collateral for lending don’t necessarily lend themselves to the models the ratings agencies use to evaluate creditworthiness.  He went so far as to say that the agencies are “plain wrong” in evaluating sovereign-credit risk.

They are “simply not giving information to the market but taking information from the market,” Noyer added.

I agree. Let’s de-certify the NRSRO designation and let professional investors be responsible for their own decisions.