The European Union is retreating from a vow to defang credit-rating companies as reforms prompted by the 2008 crisis collide with the needs of bond investors.
"More than taking a sledgehammer to crack a nut, Europe is using TNT," said Jonathan Pitkanen, who helps oversee about $43 billion of fixed-income as head of credit research at Threadneedle Asset Management Ltd. in London. "Then the law of unintended consequences kicks in and they have to back off."
Finance ministers agreed last week to revisit plans to oblige borrowers to rotate credit assessors every three years, or six if a business hires more than one firm. The backtrack comes as investors describe the changes as unworkable, citing the risk of relying on grades from firms with insufficient expertise or forgoing formal assessments.
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