(Adds S&P comments paragraphs 14, 15)

By Huw Jones

BRUSSELS, June 16 (Reuters) - Credit rating agencies will face mandatory new European Union regulation, EU Internal Market Commissioner Charlie McCreevy said on Monday, following criticism of their role in the U.S. subprime crisis.

The new rules would affect agencies including Moody's (MCO.N: Quote, Profile, Research), Standard & Poor's (MHP.N: Quote, Profile, Research) and Fitch (LBCP.PA: Quote, Profile, Research), which dominate the hitherto lightly regulated sector.

McCreevy said in a speech, prepared for delivery in Dublin and made available in Brussels, that self-regulation had proved insufficient, calling their voluntary code of conduct "a toothless wonder".

The International Organisation of Securities Commissions, made up of national market watchdogs from the EU, United States and elsewhere, drew up the code and has just beefed it up.

But McCreevy said mandatory rules were needed, dismissing the view of IOSCO and EU national market watchdogs that a voluntary approach was still best.

"I am convinced meaningful but targeted regulatory measures are now necessary for rating agencies operating in the structured credit markets in Europe, including registration, external oversight and much better internal governance," he said.

Tougher oversight of credit rating agencies is seen as necessary by EU lawmakers to help avoid a repeat of the financial market turmoil that began last August with defaults in U.S. home loans and triggered a global credit squeeze.