The European Parliament's economic and monetary affairs committee meeting in Strasbourg were voting (21 in favour, seven against with four abstentions) on reform drafted by EU Internal Market Commissioner Charlie McCreevy.
In calling for greater regulation, the committee accused the rating agencies of "failing to detect the worsening of the financial market conditions and to adapt their ratings in time".
"With this vote, the committee has shown its willingness to establish a truly effective European regulation," Jean-Paul Gauzes, the French centre-right lawmaker who is steering the measure through the Parliament, said after the vote.
The sector has been criticised for failing to warn investors about risks in subprime-related products and the measure dovetails with a G20-led global approach to introducing direct supervision of credit ratings agencies.
EU states and the Parliament have the final say on the measure. It will affect companies such as Standard & Poor's, Moody's Investors Service and Fitch Ratings.
EU states reached a deal among themselves earlier this month and the two sides started negotiations on a joint deal yesterday (24 March) for adoption by the Parliament in April.
"There are some differences between us. I hope that we will find an agreement," Gauzes said.
McCreevy has said rating agencies failed to "sniff the rot" at the heart of securitised products that turned toxic in the credit crunch.
The products were rated highly but quickly became untradeable as underlying home loans defaulted in the United States, forcing banks to make huge write-downs .
MEPs altered McCreevy's draft measure by making a pan-EU committee made up of national securities regulators from the bloc's member states the registration and supervisory authority.
EU states in their preliminary deal said national authorities should be responsible for these tasks.
A move by some lawmakers for more extensive internal rotation of agency staff than McCreevy had suggested failed. Rotation is seen as a key tool to avoid analysts from becoming too close to the industry sector they rate.
The United States has criticised McCreevy's plan for its "extraterritorial" effects as it would directly affect how ratings agencies went about their business outside the EU. Two of the three top agencies, S&P and Moody's, are US companies.
Lawmakers, along with EU states, have made changes so that ratings issued by agencies based outside the 27-nation bloc can be recognised for use by EU investors.
In the United States, there is no mandatory registration but regulators introduced rules in December to prohibit credit raters from rating their own work, and to ban employees who help determine a credit rating from negotiating any fees.
(EurActiv with Reuters)
