Special Coverage

Dominique de Villepin on Universal Credit Rating Group

Sep 19, 2014 02:29 PM Author Perspectives Font:TTT

Former France Prime Minister Dominique de Villepin, speaking at the Hong Kong Foreign Correspondents Club on Thursday, advocated for a new global financial system based on principles of diversity, confidence and responsibility, without dominance by the West.  

In his new role as Chairman to the International Advisory Council of the Universal Credit Rating Group, he also spoke about the need for new financial actors who can embody these principles for balanced prosperity of the world for the good of all.  

Referring to the 2008 global financial crisis, he called it the beginning of a worldwide revolution.

Mr. de Villepin said the West has used its historical privileges of control of currency, control of the rules, and control of risks, and put the stability of the whole world at risk.   “The 2007 / 2008 global financial crisis was the beginning of the end of the privileges of the West that have become unacceptable in the world”, he said.

“It is much easier to win a game when you are the ones deciding which are the rules, and in fact it is even easier if you can change the rules during the game according to your needs.  That is exactly what the Western power have done in the last century”, Mr. de Villepin said, and continued, “This has been true in the world’s finance in the last 30 years, and that the rules of the West created social and economic chaos because the West imposed rules on other countries just because such rules could work in Western countries.”

Mr. de Villepin said the current world system is unacceptable, unfair and dangerous.  Mr. de Villepin spoke forcefully and emphasized, “The world needs change, the world needs solutions, which cannot depend on the United States.”   “The world is ready and does not have any choice.”

The principles that he thinks the new world needs are diversity – not dominated by the West or a single sovereign, confidence – for trust to be gained through greater communication, and responsibility – encompassing elements such as regulations of public goods which cannot be left to market forces.

Dominique de Villepin was French Prime Minister from 2005 to 2007, also once a French foreign minister and a diplomat most of his career.   

He delivered his speech on global debt crisis today at the Hong Kong Foreign Correspondents Club, just 24-hours into his new appointment by Universal Credit Rating Group.  

The Universal Credit Rating Group was formed in June this year and is based in Hong Kong.  

It is a joint venture of China-based Dagong Global Credit Rating, Russia’s RusRating, and U.S. based Egan-Jones.

Dominique de Villepin said the West controlled what is risky and what is not, through their dominance of the credit-rating market. 

“The big three major credit rating agencies of the world (Standard & Poor’s, Moody’s and Fitch) are mostly American, with a 96% market share” he said.  

He further criticised the standards adopted by such agencies, “There has been an under-evaluation of the risks of the West and an over-evaluation of the risks of the countries such as China, India, Brazil and Pakistan. 

The three rating agencies represent 30 years of financial de-regulation, and failed in their role of the global financial crisis, in supporting speculative financial products.”

The credit rating agencies are accused of having given triple A high investment grade ratings to risky mortgage-backed securities which built up to the financial crisis. Mr. de Villepin referred to the establishment of UCRG as a very much-needed project, as he said one cannot judge the world only through the eyes of the West. 

Dominique de Villepin described the Universal Credit Rating Group as a worldwide alliance of credit rating agencies, rising to the challenge of independence – independence from ideology, and from influence of any single sovereign interest.   

He said the Universal Credit Rating Group advocates a double rating approach of both global and local views, which he endorses as a good approach. 

Illustrating this, Dominique de Villepin said, “You can’t see the shape of things with only one eye, you need two eyes.  It is difficult to walk with only one leg”.

He also said the agency wants new rating standards with small nuances that would be able to paint a better picture, calling it a major and important change.

In his speech, Mr. de Villepin criticized the situation in the U.S. – the current shutdown and stalemate with Congress – calling it a system that becomes incapable of making any difficult decisions.  He does not see the U.S. learning quickly from the lessons of the 2008 financial crisis, therefore the need for global financial actors such as the Universal Credit Rating Group to rise to the challenge.

Mr. de Villepin has a reputation of being an outspoken advocate.  He especially caught international attention when he opposed 2003 invasion of Iraq when he was then France foreign minister.