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3 reasons why the EU wants rating agencies to shut op for a while
The Financial Times Deutschland mentioned the fact that the EU is thinking about a ban on rating agencies issuing ratings on eurozone countries.
It could be said that the ratings agencies are like thermometers that provoke a rise of temperature.
But this is probably not the right angle to look at this possible action. The reason might be simpler, and related to the imminent EU-summit on the EFSF (European bailout fund).
- by converting the EFSF in a giga-CDO or CDS-structure (2 of the alternatives proposed), the guarantees given by the different countries so far could then be considered as debt by the rating agencies, lowering immediately the rating of France, and possibly some other countries.
- a downgrade of France is not so far away (after the US during the Summer), on the back of degrading public finances and the size and state of the big French banks. A French downgrade, a los of its AAA-status would endanger reelection of Sarkozy. There are therefore national political reasons also to make rating agencies shut up.
- the EU is considering a managed default of Greece. This could trigger a default of Portugal. But a default of Greece could also turn into realised losses for the European bailout fund (and the ECB). If that is the case, this would be counted as debt for the countries that have guaranteed the debt, again degrading their debt quality and ratings.
Therefore, the announcement of the EU plans to ban ratings, are not so innocent. They are considered in anticipation of the expansion of the EFSF and the default of Greece. A downgrade of any of the top quality (?) eurozone countries would make an enhancement of the EFSF impossible. This is the case, because the EFSF relies on.... a AAA rating to get its funding.
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4 Comments
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Nacht Und Nebel
On 20 Oct, 2011
This is the case, because the EFSF relies on.... a AAA rating to get its funding.But how can this BNP-Socgen relief fund gets a AAA rating if you forbid agencies to rate?And if the hegde fund can't be rated who will buy it?Governments with zilverpapierbonds?Newspeak says that:Parijs ijvert er voor dat het EFSF in de eerste lijn wordt ingezet om de bankencrisis op te lossen.
Logisch ook vanuit hun standpunt. De Franse banken hebben hun balansen volgeladen met probleempapier en staan op de eerste rij om te sneuvelen als het ernstig verkeerd gaat. Een redding met eigen middelen zou de oh zo begeerde triple A-status in gevaar brengen.
Again this is a DexTanic-solution.Another can of worms.Remember the plumber?Same thing happened medio 2008
Dexia heeft temidden van de financiële storm 1,5 miljard euro vers kapitaal geleend aan twee van zijn grootste aandeelhouders, Arco en de Gemeentelijke Holding. Zij gebruikten het geld op hun beurt voor 2008 om Dexia-aandelen te kopen. Dat meldt de Britse krant Financial Times.
Aber wir haben es nicht gewusst sagen der klempner und Yves de Finis.
Strange isn't it.La Belgique et Le Terme or is it Le Terme de la Belgique? -
Bart
On 21 Oct, 2011
Now it's just waiting for bloggers to be forbidden to comment on the clothes of the emperor.
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H. Vanerps
On 21 Oct, 2011
De aanvallen op de vrije meningsuiting worden steeds driester.
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Stefan D.
On 21 Oct, 2011
If eurozone countries have no ratings, what does this imply for the banks' portfolios that are invested in those no rating countries with regards to the requirements and recommendations of the Basel Committee?
