EU to investigate credit agencies

Commissioner McCreevy's remit includes the financial services sector

The European Commission is to review the credit rating industry after suggestions the sector was too slow to warn of the US sub-prime loans crisis.

With the weakness in the sub-prime mortgage market sparking fears of a global credit squeeze, Brussels will probe the industry's voluntary code.

This code aimed to stop any conflict of interest over the fact credit agencies can be paid by the firms they rule on.

A Commission spokeswoman said it would look at whether legislation was needed.

Credit worthiness

Some of the largest credit agencies include Standard & Poor's and Moody's.

Moody's senior managing director Frederic Drevon said the firm was "committed to continuing the constructive dialogue it has had with the regulators and policy makers".

Credit agencies work by determining the creditworthiness of a particular company or investment fund.

Their ruling helps determine how much interest the firm or fund in question will have to pay on funds they borrow.

The Commission's investigation will be led by the office of European Union Internal Market Commissioner Charlie McCreevy, who has responsibility for the financial services sector within the 27-nation block.

Its study is expected to continue until April next year at the earliest.