Rating agency reform: think again Don't shoot the messenger is a sentiment dating back to Sophocles. Credit rating agencies, pummelled by politicians for their sovereign debt warnings since the Greek crisis erupted two years ago, might appreciate the irony. Now, though, some bankers have joined the chorus for agency reform. Unhappy at recent downgrades - Moody's cut ratings on 26 Italian banks by up to four notches on Monday - banks suggest that information disclosed to the big agencies should be restricted, making it easier for new entrants to compete in the rating business. Like so many ideas for reforming the industry, this one seems badly thought through. To limit data would almost inevitably lead to a more conservative stance by the agencies, and poorer-quality assessments. That would hardly help issuers. Of course, more competition to Standard & Poor's, Moody's and Fitch would be welcome: these firms provide more than 95 per cent of credit ratings in western markets. But that depends on dealing with the question of who pays - issuers or investors - and devising a business model that gives the rater adequate independence. Whether regulators can help much is debatable: banks themselves have been (rightly) critical of Brussels" idea of mandatory ratings rotation - which risks pushing issuers even further into the agencies" arms. True, agencies have poor form: their contribution to the financial crisis should not be forgotten. More disclosure of their methodologies makes some sense. Pressures to minimise reliance on external ratings - through the new Basel III capital rules - are even more desirable. But no one should be penalised for highlighting uncomfortable truths, and Fitch's conclusion that European banks need another $566bn to meet Basel III standards is a timely warning of how much more work the banking sector has to do. Better to focus on that than to criticise the critics.