Draghi: rely less on ratings agencies

This would be easy, except that lots of these governments have mandated “minimum investment grade” status for investment funds, when their ratings were good, to monopolize investment cash flows into their bonds, which is part of the reason they have so much debt to begin with.

Nobody likes to rely on the ratings agencies when they’re not in favor and their debt is being forced to sell off because of their own regulations. But I notice none of these officials were complaining when they were the only game in town.

FRANKFURT, Germany (AP) — European Central Bank head Mario Draghi says it’s time for investors and regulators to rely less on ratings agencies.

Draghi, speaking as the chair of the European Systemic Risk Board, told a committee of the European Parliament that “one needs to ask how important are these ratings for the marketplace, for the regulators and for investors.”

Draghi noted that downgrades had largely been anticipated by markets. Standard & Poor’s downgraded nine eurozone governments on Friday, but markets remained calm on Monday.

He said he couldn’t comment on particular ratings, but added that “as regulators we should learn to do without ratings.”

Or people could use ratings as just one piece of information “rather than spend too much time on what they say or do.”

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