GERMANY - German consultancy Roland Berger's plan to create a "ratings agency of European origin" has been welcomed in principle by would-be rival Feri, but only if competition is not distorted.

The consultancy said the first steps towards the creation of the agency were "imminent".

Markus Krall, designated chief executive at the agency, told IPE that talks with "several large investors" were underway, and that its legal structures - i.e. a foundation and a limited company - would be created in the coming weeks.

He said the project would be on a "much larger scale" than other ratings agencies currently registered with the European supervisor ESMA.

"With an initial investment of €300m, we are expecting to achieve around 5-10% market share in the foreseeable future," said Krall, who will leaving Roland Berger as a senior partner to ensure the agency's independence.

He said the agency needed "size and a lot of money to change this market", which is driven by the effects of "scale, reputation and networking".

Further, he argued that the new agency would use scientific models only supported by "strictly regulated quantitative models", in contrast to some of the major US-based agencies.

He confirmed the new agency would essentially have the same scope - countries, large corporates, banks and structured instruments - as the three large US players.

So far, Feri is the only European-based ratings agency to cover countries, according to Tobias Schmidt, board member at Feri EuroRating Services.

The agency is also planning to offer its first ratings on structured instruments this year.

"In principle," Schmidt told IPE, "more competition is welcomed and a positive development - both for investors and those rating agencies currently dominating the market."

But he stressed that there needed to be a "level playing field for all competitors", and argued that preferential treatment of certain players - "be it on a political or regulatory level - would run counter to an increase in competition.

He said he was concerned that European politicians who had demanded a "European agency" since the sovereign debt crisis might now view Roland Berger's initiative as the one and only solution.

"If the idea of the 'European agency' focuses on European ownership, then we have already a dozen of them," he said.

Schmidt pointed out that a good ratings service was not a question of ownership or the location of its headquarters but its methodology.

He called on European institutions like the European Central Bank and the European Investment Bank to set an example by using more ratings from European agencies.

He said others then might follow and perhaps change their investment criteria.

"I do see movement regarding regulations and investment criteria," he said, "but it might take a while before there is real change."

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