Westminster Blog

The FT reports this morning that Michel Barnier, Europe’s top financial regulator, has shelved plans to rein in the credit rating agencies. Barnier, who is internal market commissioner, had to bow to objections elsewhere in the EU. We report that Barnier still unveiled proposals to transform the business model of the big agencies but has ordered some last-minute “technical work” that amounts to a ceasefire.

Both Barnier and the rating agencies were discussed in the House of Lords last night, where former City minister Lord Myners was on scathing form. First the Labour peer (a former chairman of Marks & Spencer) criticised the “flawed thinking” from the European Commission on the issue. He then continued:

I worry very much about Mr Barnier. I met Mr Barnier when he was a Minister. He came to see us at the Treasury. He came down the corridor and I was watching him. I am a great fan of art and I was rather impressed that he stopped to look at every painting. I thought this is a man with whom I share a common interest-until I realised he was actually looking at his reflection in the glass on every painting, and adjusting his hair or his toupee. This to me is a man whom we should treat with a very long spoon. I hope the Minister will take due care in working with Mr Barnier because we have been forewarned that this man intends to seek even more powers than those he announced today. He said he wants to return to the issue of censoring rating agencies. I sincerely hope that the Government and the Opposition would have no part in endorsing such an activity.

This reflects a wider attitude within Britain at the moment that the City of London is “under attack” (David Cameron’s words) from the European Commission. Plans for a Tobin tax are just one manifestation of this; for a detailed overview of the growing tensions it’s worth reading this masterful feature by former FT Westminster journalist Alex Barker.

Alex revealed a recent (summer) meeting between Sir Mervyn King and the French commissioner:

Sir Mervyn was having none of it. As his voice rose, his interpreter grew increasingly startled – particularly as the Frenchman refused to back down. An hour later, Sir Mervyn’s hands were still shaking when he sat down for lunch with George Osborne, the chancellor of the exchequer. The object of the governor’s ire was Michel Barnier…

Meanwhile George Parker revealed in this morning’s FT that Angela Merkel’s allies are now accusing the UK of selfishness – just two days before she meets David Cameron in Berlin. Volker Kauder, parliamentary leader of the Christian Democratic Union party, said it was unacceptable that Britain was “only defending its own interests.”

During last night’s debate, Myners (pictured) was also rather rude about the credit rating agencies themselves:

The reality is that credit rating agencies are a lagging indicator rather than a leading one. They tend to verify the market’s judgment rather than to lead it. We should not be terribly surprised by that. My experience is that, on the whole, credit rating agencies employ rather average people. They are given extraordinary status by Mr Peston and others on television when they talk about changes in rating, but quite frankly if you are good at the job you work in an investment bank, a bank or a hedge fund. You do not work for Fitch, Standard & Poor’s or Moody’s. On the whole, these are at best average folk. They express opinions. Their opinions are worth little more than many other opinions-certainly a lot less than those of people who make decisions with real money or authoritative commentators such as Mr Martin Wolf in the Financial Times and others. In many ways, these credit rating agencies are of little consequence at all. We should probably not spend too much time on them….