The European Union is retreating from a vow to defangcredit-rating companies as reforms prompted by the 2008 crisiscollide with the needs of bond investors.

“More than taking a sledgehammer to crack a nut, Europe is usingTNT,” said Jonathan Pitkanen, who helps oversee about $43 billionof fixed-income as head of credit research at Threadneedle AssetManagement Ltd. in London. “Then the law of unintended consequenceskicks in and they have to back off.”

Finance ministers agreed last week to revisit plans to obligeborrowers to rotate credit assessors every three years, or six if abusiness hires more than one firm. The backtrack comes as investorsdescribe the changes as unworkable, citing the risk of relying ongrades from firms with insufficient expertise or forgoing formalassessments.