BRUSSELS - The European Commission has announced a set of proposals to regulate credit rating agencies, saying they have made "serious mistakes" and increased market volatility.

The proposals, released late on Tuesday, will require rating agencies to report their decision making processes and be liable for the consequences of their rating results.

The rules, if passed by the European Parliament and member states, would apply to ratings of public entities within the EU but also outside the EU provided that the sovereign ratings are issued by a credit rating agency registered in the EU.

"We can't let ratings increase market volatility further. My first objective is to reduce the over-reliance on ratings, while at the same time improving the quality of the rating process," said Internal Market Commissioner Michel Barnier.

The proposals require that more and better information regarding the ratings would need to be disclosed by rating agencies and by the rated entities themselves. To avoid market disruption, sovereign ratings should only be published after the close of business and at least one hour before the opening of trading venues in the EU.

Meanwhile, rating agencies should be liable in case it infringes, intentionally or with gross negligence, the regulations, thereby causing damage to an investor having relied on the rating that followed such infringement.

Barnier said his proposals would also bring in competition in a sector dominated by three companies - Moody's, Standard & Poor's and Fitch Ratings - which have caused rounds of market stirs since August.

Ferdi De Ville, a researcher at the Center for EU-Studies of Ghent University in Belgium, said the EU adopted regulations on credit rating agencies in December 2010 and it was amended in May, but the events of the last several months have generated the feeling with the public that the regulations didn't go far enough.

"The plans of Barnier are to some extent far-reaching, but on other fronts he had to restrain," De Ville said.

For example, there is no mention of a credit rating agency, and the ban of sovereign credit ratings in exceptional circumstances has been removed from the regulation in the last couple of days, because there was no consensus within the Commission, likely due to lobbying efforts by the rating agencies.

"In any case, new regulation for agencies is important, but will not solve the crisis," said De Ville, adding that what is urgently needed is for the European Central Bank to come to the rescue.