Kommission vor Umstrukturierung der Rating-Agenturen gewarnt

Though the consultation asks if banks would not be better off with an additional internal analysis of sovereign debt, banking and insurance groups like ING and AXA caution against putting internal ratings on an equal footing with rating agencies' expertise.

"It should not be assumed that all firms will produce internal ratings that are superior to those from established specialised rating agencies, especially when CRAs are under regulatory pressure to improve their performance," reads a paper by AXA, the French banking and insurance group.

In addition, Dutch bank ING points out that not all institutions have such a large team of specialists as a rating agency to perform a full analysis on each sovereign.

AXA also blames national governments for any inaccuracies in sovereign ratings, saying the quality and transparency of government statistics should also be improved, especially in the European Union.

The European Banking Federation agrees it would not support treating sovereign issuers any differently to corporate debt holders.

A proposal to give countries a three-day early warning prior to a downgrade is also attacked as a way to give agencies and governments time to cut a better deal.

A joint response by the UK Treasury and Financial Services Authority agrees and adds that a more frequent review of sovereign debt – as outlined in the Commission proposal - would put even more "undue weight" on these ratings.

The UK also questions whether other financial institutions currently have the ability to produce "a robust internal assessment of sovereign debt without some reference to CRA ratings".

Unsurprisingly to many observers, a large majority of responses from the public and the private sector completely oppose any European Central Bank or national central banks' involvement in rating sovereign debt, another idea that has been doing the rounds in Brussels policy circles for some time.  

Bruegel, Brussels' biggest policy think-tank, also warns against a heavy regulatory hand as it would ramp up existing barriers to entry and costs, negating the Commission's intention of injecting new blood into the market.

"A lot of this talk sounds like a willingness to shoot the messenger," warned Nicolas Veron from Bruegel.

"We cannot make credit rating agencies liable for the quality of their opinion but we can make them liable for the quality of their process," he continued, advocating greater transparency but less regulation.