(Reuters) - European Union plans to increase competition in the credit ratings industry could prompt ill-equipped new entrants to offer a cut price service or higher ratings to lure customers, the sector's regulator said on Tuesday.
The sector is under the spotlight because of key failings that detractors say laid the ground of the financial crisis. It is also accused of exacerbating the euro zone's debt problems by downgrading government bonds at market sensitive moments.
The bloc's executive European Commission proposed a radical blueprint last November to try to wrestle the ratings market away from the "Big Three": Moody's (MCO.N), Standard & Poor's (MHP.N) and Fitch Ratings (LBCP.PA).
This would be done by mandatory "rotation" whereby users of ratings, such as banks, would have to switch to a competing agency after a certain period.