The Investment Management Association submitted a memorandum to the Treasury Select Committee into Credit Rating Agencies and in it said rating agencies performed an important role as independent commentators which should be protected.
The seven-page document covered the methodology used by rating agencies, their incentives to do their job properly, possible conflicts of interest, accountability and whether the big three had become too big, among other issues.
It concluded that the fact credit rating agencies are now regulated could be seen as a seal of approval, which has the opposite effect the European Commission desires on the current reliance on these agencies.
Guy Sears, director of wholesale at the IMA, said: "Rating agencies have made responsible and sensible decisions. Their recent downgrading of European countries has reflected, not caused, underlying fiscal problems.
"However, the agencies may be seen to hold disproportionate sway over global markets, not least because they are embedded in regulations such as Solvency II and CRD an in institutional client mandates."
Sears concluded that actions to reduce the reliance on credit rating agencies made sense, but in reality he thinks they will remain an important part of the financial market infrastructure for years to come.
To see the full memorandum, click here.
