Early spotlight on Portugal, France in new credit ratings calendar

Thu Jan 2, 2014 4:20pm EST
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By Marc Jones

LONDON (Reuters) - Europe's new calendar for sovereign credit ratings, an EU measure to shine a light on the actions of ratings agencies, will in its busy first few weeks thrust the market spotlight on bailed-out Portugal and recently downgraded France.

European Union rules came into force this month requiring Standard and Poor's, Moody's, Fitch and other credit ratings agencies that operate in Europe for the first time to lay out the dates on which they review a country's rating.

They could previously conduct and publish their market-moving reviews at a time of their own choosing and were accused by euro zone officials of exacerbating the region's debt crisis by downgrading the ratings of struggling countries at critical moments.

The rules are part of a raft of increased regulation on the agencies, which also came under fire for underestimating the risks of mortgage-related securities in the run-up to the 2007/08 global financial crisis.

All of the big three firms left it right until the year-end deadline to publish their calendars, resulting in a number of busy schedule periods that could make for volatile markets.

Mid-April looks particularly hectic; DBRS, a smaller Toronto-based firm, decides on the 11th whether or not to downgrade Italy and Spain, and Fitch does the same two weeks later.

If DBRS cuts one or both of them to B-grade territory it would mean their sovereign bonds would automatically be worth 5 percent less when swapped for cheap funding at the European Central Bank.

Before that, January gets the new system off with a bang. Moody's reviews Portugal, which is still working through its EU/IMF bailout, on the 10th. S&P follows suit on the 17th, the same day Moody's looks at Ireland, which emerged from its bailout last month, and Fitch casts the slide rule over the Netherlands.   Continued...

Passengers inside a tram pass in front of the main arch of Praca do Comercio square where the Finance Ministry is located, in Lisbon September 16, 2013. REUTERS/Jose Manuel Ribeiro