Credit Rating Agencies
Oral Answers to Questions — Treasury
2:30 pm

Photo of Chuka Umunna

Chuka Umunna (Streatham, Labour)

What steps he is taking to review the regulation of credit rating agencies.

Photo of Mark Hoban

Mark Hoban (The Financial Secretary to the Treasury; Fareham, Conservative)

The coalition Government support greater regulation of credit rating agencies. The credit rating agency regulation came into force in the EU, including in the UK, on 7 December 2009. The UK authorities continue to be active in both the EU and G20 processes, including in negotiations on amending the credit rating agency regulation and in examining ways to reduce our reliance on credit ratings for regulatory and official purposes.

Photo of Chuka Umunna

Chuka Umunna (Streatham, Labour)

These obviously follow on from the proposals of Jacques de Larosière. One problem that has been identified with the rating agencies is the conflict of interest issue. I think that we should move to a "buyer pays" model. The other issue is a lack of competition in the credit ratings market. Michel Barnier, the EU Commissioner, has floated the idea of having an EU credit rating agency, which I think is a thoroughly good idea. Does the Minister agree?

Photo of Mark Hoban

Mark Hoban (The Financial Secretary to the Treasury; Fareham, Conservative)

Of course there are areas where more work needs to be done, and the hon. Gentleman is right that Michel Barnier has made further proposals, in a consultation paper that he published earlier this year. They included looking at the business models for credit rating agencies. However, I question whether taxpayers in Europe would feel it right that their money should be going to fund credit rating agencies.

Photo of Andrew Bridgen

Andrew Bridgen (North West Leicestershire, Conservative)

Is it not a cause for cautious optimism that agencies such as Fitch, Moody's and Standard & Poor's have now given the UK such an excellent credit rating?

Photo of Mark Hoban

Mark Hoban (The Financial Secretary to the Treasury; Fareham, Conservative)

My hon. Friend is absolutely right, and it just goes to show that credit rating agencies do not get it wrong all the time. In May, Standard & Poor's put the UK's credit rating on a "negative outlook", as a consequence of the previous Government's policies. However, in October it said that

"the coalition parties have shown a high degree of cohesion in putting the U.K.'s public finances onto what we view to be a more sustainable footing."

We welcome those comments.