When regulators try to do credit analysis

The European Commission wants credit ratings left out of financial regulation — a great move, if it can find something good to replace them. But it’s making the right decision for the wrong reason. Upset at the presence of sovereign rating caps the EC has thrown a hissy fit in its final version of the Liquidity Coverage Ratio, and suggests that jurisdiction should not be a part of the credit quality of covered bonds — a view that will come as a big surprise to anyone investing in them.