The European Securities and Markets Authority (ESMA) is continuing its investigation into the way the three main credit ratings agencies assessed and issued sovereign credit ratings of European countries.
Fitch Ratings, Moody's Investors Service and Standard & Poor's may face enforcement action resulting in fines or possibly the withdrawal of licences, according to the ESMA.
"ESMA's investigation revealed shortcomings in the sovereign ratings process which could pose risks to the quality, independence and integrity of the ratings and of the rating process," said ESMA chairman Steven Maijoor.
Credit rating agencies have faced continual criticism over their activities during the European sovereign debt crisis, and prior to that when they entirely failed to flag up the global economic crisis. A specific point of contention was Standard & Poor's 2011 decision to to cut Greece's sovereign debt rating while the country was renegotiating its international bailout.
An ESMA report found frequent delays in the timing of ratings being published, and highlighted the handling and disclosure to third parties of such sensitive information.
Steven Maijoor said: "The impact which changes in these ratings can have on financial markets, and sovereign states, can be significant.
"Therefore, it is imperative that users can have confidence that the [credit ratings agencies] have adequate systems and controls in place to ensure that ratings are rigorous, free from conflicts of interest and timely."
European regulations which were enacted earlier this year have sought to diminish reliance on ratings agencies. The European Commission has pressed for rules that would force firms and institutions to rotate credit ratings agencies every few years.
The ESMA report also highlighted potential conflicts of interest between staff within ratings agencies, the division of labour among analysts and an over reliance on junior staff.
The ESMA did not give details about when any possible sanctions could be imposed.