New regulatory guidelines for exchange-traded funds and other Ucits funds published last week are “credit negative” for ETF providers, but could ultimately bolster confidence in the sector, according to a ratings agency.

Moody's said on Monday that firms such as BlackRock and State Street Corporation would see their profitability hit by higher compliance costs and stricter securities lending rules, due to a European Securities and Markets Authority document on guidelines for ETFs and other Undertakings for Collective Investment in Transferable Securities funds.