Euro MPs fail to back reforms of credit rating agencies
EURO MPs in the European
Parliament, on Wednesday, 16 January 2013, voted on changes to EU
law regulating credit rating agencies (CRAs), which are a 1st step
towards greater transparency in the financial sector.
Vice Chair of the Economic and Monetary Affairs Committee, Labour
Euro MP Arlene
McCarthy, who stands for
England's North West Region said:- "Credit ratings agencies
played a key role in the financial crisis. They rated many unstable
global banks as a triple AAA and rated certain "junk" financial
instruments as safe products. Today Labour Euro MPs supported new
rules that will make credit rating agencies more responsible, more
transparent and more democratic. Conservative Euro MPs on the other
hand failed to back these stricter rules and opted for business as
On conflicts of interest Arlene added that:- "Despite the
clear evidence that the business model of CRAs creates a conflict of
interest by encouraging financial issuers to choose the agency they
know will give them a good rating, Conservative Euro MPs failed to
reforms that are the first step towards truly independent ratings.
How can you fairly rate an institution that you are financially
On increased competition in the CRA market, Arlene commented that:-
"The new rules aim at reducing the dominance of the big three
credit rating agencies Standard and Poor's, Moody's Investor
Services and Fitch Ratings who account for 95% of the world market,
by injecting much needed competition into the market. Conservatives
preach the benefits of competition yet today failed to tough action
to break the triopoly of the big 3."
Key elements of the new EU regulations include:-
► Consideration of sovereign debt
rating as a specific rating with specific requirements.
► Inclusion of provisions to avoid
conflicts of interest - shareholders cannot be members of both CRAs
and owners of the financial instruments being rated.
► Rotation of CRAs for complex
financial products and strict requirements on mergers.
► Reduction of over-reliance of
credit ratings in EU legislation.
► Better quality and more
► Stronger liability for CRAs.
The vote follows an agreement reached between the European
Parliament, Council and Commission in late November 2012.
Mayor acts to
mitigate impact of Council tax benefit cuts
LIVERPOOL is to
significantly reduce the impact of a Government reduction in Council
Tax Benefit. From 1 April 2013, the current national scheme of
Council Tax benefit is being abolished and a new Council Tax Support
Scheme is being transferred to local government. This carries a 10%
reduction in funding compared to the current arrangements.
In real terms this means for Liverpool a reduction of around £6.2
million available to support those residents most in need.
It is part of a wider set of welfare reform changes that will
directly affect people's lives and the places where they live, as
well as impacting on a proportion of people who are in work.
Mayor Joe Anderson is to recommend to Council not to passport on the
full impact of these financial reductions.
It means the City Council will accept the government's one off
Transition grant of £1.5 million and will match this with £1.7
million to ensure that Liverpool residents do not feel the full
force of the cuts.
The 44,700 working age people who were set to be affected will only
face an 8.5% reduction, rather than the 17.5% originally proposed.
Pensioners are exempt from any cuts.
A typical claimant will be required to pay an additional £1.70 per
week, rather than £3.41 under the original proposal.
Mayor Anderson said:- "I have been thinking long and hard
about whether or not to accept the Government grant. It is only for
one year and does not solve the problem in the long term. We will
have to see what Government announces for 2014/15 and of course
examine our own financial position. This is as much as we can do
given our current financial position. After grappling with this
issue for several weeks, I have concluded that it is the right thing
to do to take the money in order to offset the impact on the most
vulnerable people in the City."