The European Commission has set up an expert panel to assess the work of financial analysts in a bid to restore investor confidence after corporate crises such as that seen at Enron, EU officials said this week.

Financial analysts have come under increasing pressure in the United States, where regulators are investigating major investment banks amid allegations that analysts slanted their research to please executives and win banking business for their firms.

The experts group, which will feature regulators, financial analysts, journalists and lawyers, will look at similar issues.

It met for the first time on Wednesday and is due to produce a report addressed to the European Union Executive Commission within six months.

"The group will look at the management of conflict of interests to ensure independent analysis, how the research is paid for, the role of best practice codes and regulation," an EU official has said.

The group is expected to produce a report addressed to the Commission within six months.

An EU Bill on market abuse, which is set to be passed soon, already partially addresses the issue by introducing tougher measures against disclosure or false or misleading information by analysts to the market.

The Bill also requires analysts to disclose their personal financial interests at the bottom of a client's note.

The expert panel will not address the role of rating agencies and their stock valuation despite some calls from within the industry for rapid action on this front.

"Rating agencies are clearly outside the financial sector, but their influence on investors' decision is enormous," Mr Eberhard Zinn, a member of the board of management of Bayerische Landesbank, told a financial regulation conference.

"We need to regulate not only the financial sector but also rating agencies," he added.

In the United States, the Securities and Exchange Commission is weighing new rules for credit raters as part of a broad campaign to restore confidence among investors.

Credit agencies, which grade the riskiness of debt instruments issued by corporations, came under intense scrutiny after the collapse of Enron.

Just days before Enron filed for bankruptcy last December, two top rating agencies were still classing its debt as investment grade. The rates were dropped to junk status after the former energy trade giant filed for bankruptcy. - (Reuters)