Never mind the fact that some European governments spent too much and saved too little, or that there was (is) a real risk of default on the part of some peripheral nations.
In a clear case of shoot the messenger, heads of state and supra-national institutions alike have condemned the fire-fuelling they consider to be the prime undertaking of Moody’s, Standard & Poor’s, Fitch and their lesser brethren.
But before we get belligerent on behalf of the ratings agencies, a step back, a deep breath and a bit of careful consideration might be worth our while.
First of all, how likely is is that this shake up will come to pass?
The European Commission is suggesting markets regulator Esma (European Sales and Markets Authority) should be allowed to suspend the ratings of a country under-going a bail out.
This would attempt to contain the contagion effect so many commentators have worried about throughout the debt crisis.
According to a draft of the proposals seen by the Financial Times, Esma would be able to ban sovereign ratings in exceptional situations to prevent "that credit ratings agencies issue sovereign ratings which do not accurately reflect the situation of the country concerned and could cause negative spillover effects to other countries".
Another measure put forward by the Commission for suggestion is that issuers of financial products in Europe should be forced to change the agency they use on a regular basis to prevent cosy relationships from developing.
The conflict of interest argument has long been apparent in so far as credit issuers pay the agencies that rate their credit.
But the agencies have been likened to the auditing profession in the way that there seems to be no genuine alternative.
Bryn Jones, head of fixed income at Rathbones Investment Management, said: "I don’t know how you get away from that conflict of interest, other than if there is a government funded agency. The government would have to take it out of the private domain and put it in the public domain. So it’s a situation we are going to live with for a long while."
He also expressed doubts at the ability of the EU to "bend the arm of S&P" to prevent it doing its job as it sees fit.
Incompetent and ill-timed?
Since 2007 the ratings agencies have come under fire for failing to downgrade ahead of time the assets of the financial institutions that led to the credit bubble and subsequent crisis.
Jones said the criticism the agencies are now facing is hypocritical, because now they are doing their job properly the governments don’t want to know.
Peter Harvey, head of credit at Cazenove Capital Management, said that aside from the hypocrisy, the new propositions would also prove to be "unworkable".
"You need to be following a company closely and for a long period of time in order to get expert knowledge of that company.
"These are knee jerk reactions from Brussels to some extent and the authorities are sending out contradictory messages."
Europe needs them
He explained that Europe "needs the ratings agencies" because the viability of the European Financial Stability Fund depends on the AAA rating it currently enjoys.
Harvey also said that like a lot of discussions happening at the European level at the moment, he doubted the proposals would be passed in their current form.
"A lot of these are just ideas that get floated about, only about 2% will ever come to pass."
For fixed income managers as a bunch the potential impact on the ratings agencies doesn’t concern them.
"Any fixed income manager worth their salt doesn’t rely on credit ratings agencies anyway," said Jones, "We do our own credit research and pick any problems up more quickly on our own."
On the part of the ratings agencies, only one of the big three saw fit to comment.
A spokesperson from Moody’s said: "According to reports, the Commission is likely to announce further proposals to regulate credit ratings agencies by the end of November.
"Based on news reports, the measures appear to include allowing regulators to interfere with agencies’ views, and even forbidding agencies to publish sovereign ratings.
"Proposals such as these will undermine investors’ confidence in European credits, disrupt access to capital markets for sovereign and corporate issuers, and increase volatility in the European credit markets.”
