LONDON, Aug 16, 2007 (AFP) – The European Commission will investigate the role played by credit rating agencies in the recent crisis over subprime US home loans, the Financial Times reported on Thursday. “If the rating agencies believe this is going to be business as usual, they are very wrong,” an unnamed Commission official told the business daily.
“The securitised subprime mortgage market would not have grown to the extent that it did without the favourable ratings given by some agencies.”
According to the FT, banks first warned about a potential crisis in subprime home loans — high-risk loans to people with poor credit histories — last year, but credit agencies Standard and Poor’s and Moody’s only downgraded ratings on relevant securities earlier this year.
Traders remain highly sensitive to evidence that losses from US subprime home loans are affecting banks or investment funds around the world.
The FT said that EU Internal Market Commissioner Charlie McCreevy met with senior S&P executives last month and expressed his concern over the subprime mortgage market. He has reportedly invited securities regulators from across Europe to a meeting next month to discuss rating agencies a