Credit Rating Agencies

Credit Rating Agencies Scapegoat or free-riders? ECMI Commentary nary(prenominal) 20/9 October 2008 Karel Lannoo n the heels of similar action in the US, the EU now besides intends to subject credit rank agencies to Europe-wide regulation. besides his strong stated beliefs in securities industry solutions and self-regulation, European Commissi whizzr Charlie McCreevy issued a indite directive for consultation in July 2008, which proposes extremely elaborated and prescriptive regulation of the activities of rating agencies. Although policymakers had no election merely to take the stick out from behind the door, the draft raises unsounded questions about the form of regulation, the impact on the diligence and the markets. Alternatives should at that placefore be considered. Rating agencies rapidly emerged as one of the archetypical villains, but also victims of the financial crisis. Early after(prenominal) the outbreak of the subprime crisis in August 2007, it became evident that credit rating agencies (CRAs) had actively contributed to the significant estate bubble by over-rating precedential tranches in finicky purpose vehicles. Moreover, it also appeared that the CRAs faced skilful conflict-of-interest problems because they not but rated the products, but also gave advice on how to building them.

Doubts had already emerged on the role of CRAs after the South-East Asia crisis in 1998 and successively in the dot-com bubble such that policy-makers could no longer concentrate aside. The general feeling now is that statutory regulation is required. non just did the Europea n Commission return to that conclusion, but! also the Financial Stability Forum (FSF) in its report on the market turmoil (April 2008) and the European sevens in both own initiative reports (Rasmussen and van der Burg, kinsfolk 2008), which explicitly cheer further regulation. Ratings agencies are special entities, however, and there are only a few that count. The two largest ones, S&P and sinisters, are said to control 80% of the global market in which there is limited...If you want to shake a sufficient essay, order it on our website: BestEssayCheap.com

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