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The regulation of credit rating agencies: A realistic view

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  • Imad A Moosa

    (School of Economics, Finance and Marketing, RMIT)

Abstract

There is a widespread agreement on the proposition that the performance of the credit rating agencies has not been that great and that their ratings and downgrades played pivotal roles in the global financial crisis and the European sovereign debt crisis. Yet most of the regulatory proposals to deal with them are no more than tweaks around the edges because of the belief that it is difficult to disentangle the regulatory process from the views of the rating agencies in a framework that was put in place in the 1930s. In this paper it is argued that taking the rating agencies out of the regulatory framework is not as problematic as it is portrayed to be and that the task should not carried out without other fundamental regulatory changes.

Suggested Citation

  • Imad A Moosa, 2017. "The regulation of credit rating agencies: A realistic view," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(2), pages 180-200, April.
    • Handle: RePEc:pal:jbkreg:v:18:y:2017:i:2:d:10.1057_jbr.2015.9
    DOI: 10.1057/jbr.2015.9
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    References listed on IDEAS

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    1. Skreta, Vasiliki & Veldkamp, Laura, 2009. "Ratings shopping and asset complexity: A theory of ratings inflation," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 678-695, July.
    2. Patrick Bolton & Xavier Freixas & Joel Shapiro, 2012. "The Credit Ratings Game," Journal of Finance, American Finance Association, vol. 67(1), pages 85-112, February.
    3. Siegfried Utzig, 2010. "The Financial Crisis and the Regulation of Credit Rating Agencies : A European Banking Perspective," Finance Working Papers 21990, East Asian Bureau of Economic Research.
    4. Mathis, Jérôme & McAndrews, James & Rochet, Jean-Charles, 2009. "Rating the raters: Are reputation concerns powerful enough to discipline rating agencies?," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 657-674, July.
    5. Imad A. Moosa, 2015. "Good Regulation, Bad Regulation," Palgrave Macmillan Studies in Banking and Financial Institutions, Palgrave Macmillan, number 978-1-137-44710-4, June.
    6. Jonathan Katz & Emanuel Salinas & Constantinos Stephanou, 2009. "Credit Rating Agencies," World Bank Publications - Reports 10227, The World Bank Group.
    7. Utzig, Siegfried, 2010. "The Financial Crisis and the Regulation of Credit Rating Agencies: A European Banking Perspective," ADBI Working Papers 188, Asian Development Bank Institute.
    8. Lawrence J. White, 2010. "Markets: The Credit Rating Agencies," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 211-226, Spring.
    9. Mählmann, Thomas, 2008. "Rating agencies and the role of rating publication rights," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2412-2422, November.
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    Cited by:

    1. Dimitar Rafailov, 2020. "Regulation of Credit Rating Agencies - Different Views and Solutions," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, vol. 9(2), pages 13-22, August.
    2. Jan Libich & Liam Lenten, 2022. "Hero or villain? The financial system in the 21st century," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 3-40, February.
    3. repec:mth:ijafr8:v:9:y:2019:i:1:p:209-228 is not listed on IDEAS

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