27^th April 2010

Financial Times (FT.com)

Alfred Mifsud

 

Sir, No serious reform of rating services can leave in force the present issuer-pays model. As you state (editorial, April 26), an investor-pays model would be a better approach but this is quite impractical given the wide investor base.

 

I feel the best approach would be for appointment for ratings to be issued by regulators who will charge back fees to the issuers. This would avoid a direct relationship between the rating agency and the bond issuer and will place regulators in a situation where they select rating agencies based on their performance and professionalism, not on the basis of their accommodation to the needs of the bond issuer.

 

It would also permit gentle lowering of the barriers to entry to ensure more competition among rating agencies without lowering standards.

 

Alfred Mifsud
Balzan, Malta