Big Three ratings agencies defy new curbs to regain pre-crisis clout-watchdog

By Huw Jones

LONDON, Feb 16 (Reuters) - Revenues and margins at Europe's "Big Three" credit rating agencies (CRAs) are back to pre-financial crisis levels and the trio are in line for more business, despite a welter of new rules aimed at reducing their influence, a regulator said on Monday.

Moody's, Standard & Poor's and Fitch came under fire when securitised debt they rated highly turned toxic from 2007, sowing the seeds for a global market meltdown and costly bank bailouts.

Lawmakers on both sides of the Atlantic (Shanghai: 600558.SS - news) passed a raft of rules to better supervise the agencies and the United States even banned the use of ratings in some instances.

Yet the European Securities and Markets Authority (ESMA), which regulates the 27 rating agencies operating across the 28-country European Union, said that as demand for rating securitised debt fell, ratings for high-yield corporate debt filled the gap.

"Data show that revenues and margins of the three largest CRAs have been growing materially since 2010, with 2013 figures back to the levels last seen before the financial crisis hit in 2008," ESMA said in its annual report on the agencies.

The Big Three still dominate, even though far more agencies now operate in Europe to offer competition. "This growth has not had a significant impact on the overall market shares of CRAs, which remain largely unchanged since 2013," ESMA said.

The demand for ratings may even grow further.

ESMA Chairman Steven Maijoor said the new rules had aimed to ensure financial stability and a high level of investor protection.

"Such objectives remain valid in the current economic and financial environment, where new policy initiatives at European level, like measures to stimulate alternative sources of funding to traditional banking, emphasise the need for high quality credit ratings," Maijoor said in a statement.

The EU's executive European Commission will on Wednesday set out plans to boost the ability of markets to provide funding for companies, in particular from high-quality securitised debt that applies lessons from the financial crisis. (Editing by David Holmes)