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Part VII International Securities, Including Markets and Clearing Systems, 21 Credit Rating Agencies »

Charlotte Eborall
From: Financial Markets and Exchanges Law (3rd Edition)
Edited By: Michael Blair, George Walker, Stuart Willey
This chapter concentrates on credit rating agencies (CRAs), which play a key role in financial markets. It explains how CRAs help reduce information asymmetry between investors and issuers by providing an independent assessment of the relative creditworthiness of countries or companies. It also describes how CRA's role has expanded significantly in recent decades with financial globalization, such as the introduction of references to credit ratings in regulations and the embedding by market participants of ratings in their operating procedures, investment decisions, and contracts. This chapter identifies the heavy reliance on CRAs as one of the main contributors to the global financial crisis in 2008. It also talks about the efficacy of CRAs' credit ratings after 2008, in which regulators in the United States (US) and Europe introduced new regulations intended to address the reliability of CRAs' predictions of probability of default.

Part VI International Markets and Exchanges, 19 Credit Rating Agencies »

Charlotte Eborall
From: Financial Markets and Exchanges Law (2nd Edition)
Edited By: Michael Blair, George Walker, Stuart Willey
19.01 Credit rating agencies (CRAs) play a key role in financial markets, helping to reduce information asymmetry between investors and issuers by providing an independent assessment of the relative creditworthiness of countries or companies. Their role has expanded significantly in recent decades with financial globalization, the introduction of references to credit ratings in regulations, and the embedding by market participants of ratings in their operating procedures, investment decisions, and contracts. Although CRAs’ ratings provided fairly robust and...