Tougher rules due for rating agencies

By Kang Seung-woo

Staff reporter

The government is planning to bring transparency to the way rating agencies do business.

The step follows criticisms that the global rating agencies have not done their jobs properly, helping trigger the two financial crises within three years.

The Financial Services Commission (FSC) said Wednesday that first it will more strongly enforce a set of regulations introduced in January, leaving the doors open for more new regulations later;

In January, the FSS introduced regulations for regular checks on whether the agencies collude to give good grades for certain firms or grade ``client" firms better.

Also likely to be introduced were measures echoing those being taken by the United States and Europe.

The United States voted to end the ability of financial institutions to choose their credit rating agencies that rate their investment products and to end the government's reliance on ratings agencies as a standard for determining credit worthiness last week.

In the European Union (EU), rating agencies are barred from consulting services and a model of credit rating standard should be open.

The FSC will try to bring about a qualitative competition between agencies, referring to the global movement.

However, the authorities sounded cautious.

"Regarding tightening the regulation on rating agencies, we need to be careful about not imposing burdens that can interfere with their missions," a FSC official said.

With the European debt woes intensifying, the world's three major ratings agencies ― Moody's, Standard and Poor's and Fitch ― have lost their footing.

In addition, the three agencies were slammed for downgrading Greece, Portugal and Spain during the downturn.

French President Nicolas Sarkozy and German Chancellor Angela Merkel have insisted that they downgraded these countries based on the current market situation rather than on their fundamentals.