The European Union's markets watchdog has warned that it may take "enforcement action" against the big three credit ratings firms after it found "deficiencies" in the way that they rank sovereign bonds, the Wall Street Journal reported today. The three U.S.-based rating firms have faced an onslaught of criticism and new regulation in Europe in recent years after lawmakers criticized the timing of their decisions to downgrade European sovereigns for aggravating the region's financial crisis. In a report published on today, the Paris-based European Securities and Markets Authority, or ESMA, warned of a series of "actual failings or potential risks" that might compromise the independence and accuracy of the agencies — Fitch Ratings, Moody's Investors Service and Standard & Poor's. It also pointed to failings in the way the agencies handled confidential information, including disclosure of upcoming rating actions to third parties, and highlighted "significant and frequent delays" in the publication of ratings.
