EU ministers seek tougher rating agency oversight

By Huw Jones

BRUSSELS, July 8 (Reuters) - European Union finance ministers agreed on Tuesday to introduce legislation to oversee credit rating agencies after the U.S. subprime crisis highlighted the industry's failures.

Rating agencies such as Standard & Poor's (MHP.N), Moody's (MCO.N) and Fitch (LBCP.PA) have been widely criticised as too slow to warn investors about the risks in mortgage-backed structured products they had rated highly but which became virtually untradeable as the U.S. home loan crisis unfolded.

French Economy Minister Christine Lagarde, whose country holds the EU presidency, has suggested rating agencies should be registered to operate in the 27-nation bloc, thereby making them legally answerable to regulators.

"I think if we can reach agreement on rating agencies on a European registration system which may well be different from the American system and a system for monitoring the way they apply the code of conduct, that will be real progress," Lagarde told a meeting of EU finance ministers.

Dutch Finance Minister Wouter Bos said the sector needed more transparency.

"Is there a need for further regulation and further control over what they are actually doing? I believe yes," Bos told reporters as he arrived for the meeting.

"They were the source of this crisis, and we should do something. It's a black box how these ratings come into existence; nobody knows why they are, what they are, and they have clearly failed over the past few years," Bos said.

EU Internal Market Commissioner Charlie McCreevy, who has the sole right to propose EU financial services legislation, told the meeting he would propose draft laws on the sector in October.