Category Archives: Financial Institutes

Citigroup names Jane Fraser as first woman CEO

rfi.fr – AFP, 10/09/2020

Citigroup named Jane Fraser as its next CEO, replacing Michael Corbat who
will retire in February Julian R. Photography/AFP

New York (AFP) - Citigroup named Jane Fraser as its next chief executive on Thursday, tapping a woman to lead a giant Wall Street bank for the first time.

She will take over the top job in February, replacing Michael Corbat who will retire.

Fraser, who has served as president and CEO of global consumer banking since 2019, will join the board of directors immediately, the bank said. She has held prior roles for Citi in Latin America and in investment banking.

"I am honored by the Board's decision and grateful to Mike for his leadership and support," Fraser said in a press release.

"Our balance sheet is strong and our commitment to serving our clients and communities is even stronger. I will do everything I can to make all our stakeholders proud of our firm as we continue to build a better bank and improve our returns."

The move comes as Citi pivots to a more challenging operating environment as large banks set aside billions of dollars to prepare for bad loans due to the coronavirus.

Other women have become CEOs of big financial companies or in related industries, such as Abigail Johnson at Fidelity Investments and Julie Sweet at Accenture. But in taking the helm of the fourth-biggest US bank by assets, Fraser joins a group of Wall Street CEOs that until now has been exclusively led by white men.

Her appointment to the top job had been telegraphed from her prior promotion in October 2019 to president and head of global consumer banking. Senior women at JPMorgan Chase are also in line to potentially take the top job to succeed Jamie Dimon, who is expected to retire in the coming years.

Corporate America is also under scrutiny over the paltry number of Black leaders in the wake of massive racial justice protests this year.

Industry faces headwinds

After stumbling badly during the subprime mortgage crisis, Citigroup recovered in the ensuing decade after the 2008 financial crisis.

From 2012 to 2019, the banking giant saw net income rise from $7 billion to $20 billion, Corbat said in the press release.

"We went from returning hardly any capital to returning nearly $80 billion in capital to our shareholders over the last six years," he said.

The improvement coincided with a post-2008 US economic expansion that ended abruptly with the coronavirus outbreak.

In the most recent quarter, Citigroup added $5.6 billion in reserves for bad loans, a factor in a 73 percent drop in profits to $1.3 billion. Large banks are also staring at a lengthy period of low interest rates, putting a damper on another source of profits.

"The pandemic has a grip on the economy and it doesn't seem likely to loosen until vaccines are widely available," Corbat said on a conference call with analysts.

The Scottish-born Fraser joined Citi in 2004 after earlier roles at Goldman Sachs and McKinsey & Company. She has spoken openly about being a working mother in finance, recounting in 2016 how she worked part-time at McKinsey.

Having children "humanized me," Fraser said in the 2016 appearance at the Americas Society. "There is nothing like having children to help you understand where your priorities are."

Fraser also recounted her sometimes unorthodox career moves, such as exiting as head of the private bank in London in 2013 to oversee a turnaround of the mortgage business from St. Louis, Missouri in the midwest of the United States.

"Everyone thought I was completely nuts," she said. "I knew I would grow. I knew I would a learn a completely different skill set."

Shares of Citigroup were flat at $51.41 in late-morning trading.

Indonesia eyes moving capital from congested Jakarta

Yahoo – AFP, April 29, 2019

Jakarta is home to some 30 million people and is also one of the world's fastest
sinking cities due to excessive groundwater extraction (AFP Photo/ADEK BERRY)

Jakarta (AFP) - Indonesia is considering a plan to move its capital away from sprawling megalopolis Jakarta, officials said Monday, but any jump to a new city could still be years away.

The idea of moving Indonesia's seat of government from an urban conglomeration of nearly 30 million people with some of the world's worst traffic jams has stretched on for decades.

Low-lying Jakarta is also prone to annual flooding and is one of the world's fastest sinking cities due to excessive groundwater extraction.

On Monday, urban planning minister Bambang Brodjonegoro said the long-stalled relocation plan won approval from President Joko Widodo who favoured moving the capital away from Indonesia's most populous Java island.

Jakarta, which suffers billions of dollars in annual congestion-and-flood linked economic losses, would remain the country's financial hub.

"(Widodo) decided on ... the option to relocate the capital," Brodjonegoro said after a cabinet meeting.

In a statement before the meeting, Widodo expressed support for the idea, but he did not give an alternate location or a timeline for any move.

"In the future, would Jakarta be able to carry the double burden of being both the centre of government and its business centre?" he asked in the statement.

"If we prepare well from the very beginning, this great (relocation) idea could be realised," he added.

During his re-election campaign, Widodo pledged to spread economic growth more evenly in the nation of 260 million.

He won a second term this month, according to unofficial poll results.

Local media have reported that a possible new capital would be Palangkaraya city on the island of Borneo.

Europe announces a fresh, ‘credible’ Greek rescue deal

Deutsche Welle, 22 July 2011 

Greece's second aid package is
larger than the first
European leaders say the eurozone, the International Monetary Fund and the private sector will all contribute towards a second package of emergency loans for Greece, as a debt-dominated summit concludes in Brussels.

European Union President Herman van Rompuy said after Thursday's summit in Brussels that the bloc had reached three important decisions which had unanimous support within eurozone.

"We improved the Greek debt sustainability, we took measures to stop the risk of contagion, and finally, we committed to improve the eurozone's crisis management," Rompuy said in the opening moments of his official address.

The EU president said that the instability of the Greek economy, coupled with the resultant jitters on international markets, ultimately could have threatened the single European currency and the economic recovery in Europe and the wider world.

"Convening this meeting focused the minds and accelerated finding a solution. I could not allow a difficult situation to become a dangerous one," Rompuy said.

The nuts and bolts

European leaders in conjunction with the International Monetary Fund (IMF) agreed to lend Greece an additional 109 billion euros (157 billion dollars) in order to cover its financing shortfalls and prevent Athens from defaulting on its sovereign debt.

The program will include lower interest rates and extended maturities as well as a voluntary contribution from private sector financial institutions amounting to 37 billion euros, according to a statement released by the leaders after the summit.

Merkel and Sarkozy struck an
agreement before the summit
European Central Bank chief Jean-Claude Trichet reacted coolly to concerns that even voluntary participation by the private sector could provoke rating agencies to downgrade Greece's credit worthiness.

"I don't think experts consider that what has been done would trigger a credit event," Trichet said after the summit.

'European package'

Greece's second aid package, including private contributions, will total at least 146 billion euros. The package comes in addition to the 110 billion euros Athens was promised as part of its first bailout in 2010.

"The only thing we're asking for is the right to make deep changes in our country to make our country a viable one, one of growth and jobs creations," Greek Prime Minister George Papandreou said. "This is a European success, a European package."

The breakthrough deal was made possible after German Chancellor Angela Merkel and French President Nicolas Sarkozy came to an agreement in Berlin on Wednesday.

Sarkozy said that Europe was prepared to stand with Athens and guarantee its credit worthiness in the event that credit agencies declare Greece in limited default.

"We have agreed to create the beginnings of a European Monetary Fund," he said.

Author: Spencer Kimball, Mark Hallam (AFP, Reuters, dpa)
Editor: Joanna Impey


Paul Hellyer - Abolishing Fed and new energy disclosure key to US survival


Chinese FM calls for further ASEAN Plus Three cooperation for regional prosperity

Foreign ministers and delegates of ASEAN and China, Japan and the
 Republic of Korea, pose for group photos during the ASEAN and China,
Japan and the Republic of Korea foreign ministers' meeting held in Bali,
Indonesia, July 21, 2011. (Xinhua/Chen Duo)

Indonesia Exposure to Global Risk is Limited: IMF

Jakarta Globe, July 21, 2011

Relatedarticles

Indonesiafaces limited exposure to a large exit of foreign capital at a time of globalrisk aversion due to strong fundamentals and relatively low dependence onexternal demand, the IMF said on Thursday.

TheInternational Monetary Fund cited the country’s strong export growth, includingin manufacturing, and said the continued flexibility of the rupiah’s exchangerate would help protect against volatile cash inflows.

Thecomments come as Indonesia’s central bank tries to cap huge inflows of foreigncash from investors seeking higher interest rates than in the West, which itfears could trigger economic instability.

“IndonesianGDP growth is projected to remain robust at around 6.5 percent in 2011--12,”the IMF said in a statement following a consultation with Indonesian officialsand central bankers.

“Increasesin both foreign and domestic investment are supporting growth, whileaccelerating credit growth and expected reductions in energy subsidies shouldpush core inflation modestly higher this year and into 2012,” it said.

The fundalso urged Indonesia to reduce fuel subsidies so that it could boost spendingon infrastructure and social welfare.

IMF,however, said there was a risk of higher inflation if the government cut energysubsidies, and that the central bank would need to “act decisively” if thegovernment took that course.

Agence France-Presse

Paul Hellyer – Abolishing Fed and new energy disclosure key to US survival





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The company formed by the union of Bumi Resources and
Berau Coal Energy is looking to acquire coal mines around
the world and become a global giant, investor Nathaniel
Rothschild, left, said on Friday, Dec 17, 2010.

Bilderberg Group 2011: Arab Spring, DSK top secret agenda




Eustace Mullins - Who Rules Your Rulers? from Ritchy_Niburu_2 on Vimeo.

S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor's is critical of
the banks' plans
The Standard & Poor's rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.

French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.

German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan - and so did the German finance ministry.

But the ratings agency Standard & Poor's warned on Monday that this option "would likely amount to a default under our criteria." The other two major rating agencies, Fitch and Moody's, did not react immediately, but it was expected that they could well come to a similar assessment.

S&P warning calls into question second bailout package

Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.

Eurozone finance ministers put off
deciding on a second bailout package
to help Greece
At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.

The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.

Criticism grows louder of rating agencies' power

With the controversy surrounding a second bailout package due to the assessment of Standard & Poor's, criticism of the big rating agencies' power is growing louder.

ECB member Ewald Nowotny is
one of the rating agencies' critics
European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece's financial stabilization.

The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was "inappropriate." And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one "uneasy."

The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law - at first only in the US, but then in Europe as well.

"The ratings from the big three were declared mandatory for European firms active in the US market," Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.

The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.

"We can't have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties," Straubhaar said.

EU makes efforts to curb the influence of the three big players

Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union's executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).


The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.

Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.

But economists are not so sure such a European agency would change much. "We don't need rating agencies to tell us that Greece is on the verge of bankruptcy," said Thomas Straubhaar. "A European agency would not be able change anything about this fact, nor could it correct it."

And Torsten Hinrichs of Standard and Poor's told Deutsche Welle investors were already free to place their trust in a whole range of agencies.

So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors' trust.

Author: Andrea Rönsberg
Editor: Nicole Goebel

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S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor's is critical of
the banks' plans
The Standard & Poor's rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.

French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.

German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan - and so did the German finance ministry.

But the ratings agency Standard & Poor's warned on Monday that this option "would likely amount to a default under our criteria." The other two major rating agencies, Fitch and Moody's, did not react immediately, but it was expected that they could well come to a similar assessment.

S&P warning calls into question second bailout package

Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.

Eurozone finance ministers put off
deciding on a second bailout package
to help Greece
At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.

The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.

Criticism grows louder of rating agencies' power

With the controversy surrounding a second bailout package due to the assessment of Standard & Poor's, criticism of the big rating agencies' power is growing louder.

ECB member Ewald Nowotny is
one of the rating agencies' critics
European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece's financial stabilization.

The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was "inappropriate." And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one "uneasy."

The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law - at first only in the US, but then in Europe as well.

"The ratings from the big three were declared mandatory for European firms active in the US market," Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.

The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.

"We can't have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties," Straubhaar said.

EU makes efforts to curb the influence of the three big players

Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union's executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).


The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.

Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.

But economists are not so sure such a European agency would change much. "We don't need rating agencies to tell us that Greece is on the verge of bankruptcy," said Thomas Straubhaar. "A European agency would not be able change anything about this fact, nor could it correct it."

And Torsten Hinrichs of Standard and Poor's told Deutsche Welle investors were already free to place their trust in a whole range of agencies.

So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors' trust.

Author: Andrea Rönsberg
Editor: Nicole Goebel

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S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor's is critical of
the banks' plans
The Standard & Poor's rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.

French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.

German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan - and so did the German finance ministry.

But the ratings agency Standard & Poor's warned on Monday that this option "would likely amount to a default under our criteria." The other two major rating agencies, Fitch and Moody's, did not react immediately, but it was expected that they could well come to a similar assessment.

S&P warning calls into question second bailout package

Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.

Eurozone finance ministers put off
deciding on a second bailout package
to help Greece
At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.

The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.

Criticism grows louder of rating agencies' power

With the controversy surrounding a second bailout package due to the assessment of Standard & Poor's, criticism of the big rating agencies' power is growing louder.

ECB member Ewald Nowotny is
one of the rating agencies' critics
European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece's financial stabilization.

The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was "inappropriate." And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one "uneasy."

The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law - at first only in the US, but then in Europe as well.

"The ratings from the big three were declared mandatory for European firms active in the US market," Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.

The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.

"We can't have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties," Straubhaar said.

EU makes efforts to curb the influence of the three big players

Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union's executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).


The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.

Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.

But economists are not so sure such a European agency would change much. "We don't need rating agencies to tell us that Greece is on the verge of bankruptcy," said Thomas Straubhaar. "A European agency would not be able change anything about this fact, nor could it correct it."

And Torsten Hinrichs of Standard and Poor's told Deutsche Welle investors were already free to place their trust in a whole range of agencies.

So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors' trust.

Author: Andrea Rönsberg
Editor: Nicole Goebel




S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor's is critical of
the banks' plans
The Standard & Poor's rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.

French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.

German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan - and so did the German finance ministry.

But the ratings agency Standard & Poor's warned on Monday that this option "would likely amount to a default under our criteria." The other two major rating agencies, Fitch and Moody's, did not react immediately, but it was expected that they could well come to a similar assessment.

S&P warning calls into question second bailout package

Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.

Eurozone finance ministers put off
deciding on a second bailout package
to help Greece
At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.

The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.

Criticism grows louder of rating agencies' power

With the controversy surrounding a second bailout package due to the assessment of Standard & Poor's, criticism of the big rating agencies' power is growing louder.

ECB member Ewald Nowotny is
one of the rating agencies' critics
European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece's financial stabilization.

The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was "inappropriate." And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one "uneasy."

The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law - at first only in the US, but then in Europe as well.

"The ratings from the big three were declared mandatory for European firms active in the US market," Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.

The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.

"We can't have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties," Straubhaar said.

EU makes efforts to curb the influence of the three big players

Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union's executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).


The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.

Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.

But economists are not so sure such a European agency would change much. "We don't need rating agencies to tell us that Greece is on the verge of bankruptcy," said Thomas Straubhaar. "A European agency would not be able change anything about this fact, nor could it correct it."

And Torsten Hinrichs of Standard and Poor's told Deutsche Welle investors were already free to place their trust in a whole range of agencies.

So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors' trust.

Author: Andrea Rönsberg
Editor: Nicole Goebel

Related Articles:




S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor's is critical of
the banks' plans
The Standard & Poor's rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.

French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.

German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan - and so did the German finance ministry.

But the ratings agency Standard & Poor's warned on Monday that this option "would likely amount to a default under our criteria." The other two major rating agencies, Fitch and Moody's, did not react immediately, but it was expected that they could well come to a similar assessment.

S&P warning calls into question second bailout package

Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.

Eurozone finance ministers put off
deciding on a second bailout package
to help Greece
At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.

The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.

Criticism grows louder of rating agencies' power

With the controversy surrounding a second bailout package due to the assessment of Standard & Poor's, criticism of the big rating agencies' power is growing louder.

ECB member Ewald Nowotny is
one of the rating agencies' critics
European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece's financial stabilization.

The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was "inappropriate." And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one "uneasy."

The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law - at first only in the US, but then in Europe as well.

"The ratings from the big three were declared mandatory for European firms active in the US market," Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.

The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.

"We can't have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties," Straubhaar said.

EU makes efforts to curb the influence of the three big players

Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union's executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).


The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.

Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.

But economists are not so sure such a European agency would change much. "We don't need rating agencies to tell us that Greece is on the verge of bankruptcy," said Thomas Straubhaar. "A European agency would not be able change anything about this fact, nor could it correct it."

And Torsten Hinrichs of Standard and Poor's told Deutsche Welle investors were already free to place their trust in a whole range of agencies.

So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors' trust.

Author: Andrea Rönsberg
Editor: Nicole Goebel