The Independence of Credit Rating Agencies PDF Download

Author: Gianluca Mattarocci
Publisher: Academic Press
ISBN: 012404736X
Category : Business & Economics
Languages : en
Pages : 200

View

Book Description
The Independence of Credit Rating Agencies focuses on the institutional and regulatory dynamics of these agencies, asking whether their business models give them enough independence to make viable judgments without risking their own profitability. Few have closely examined the analytical methods of credit rating agencies, even though their decisions can move markets, open or close the doors to capital, and bring down governments. The 2008 financial crisis highlighted their importance and their shortcomings, especially when they misjudged the structured financial products that precipitated the collapse of Bear Stearns and other companies. This book examines the roles played by rating agencies during the financial crisis, illuminating the differences between U.S. and European rating markets, and also considers subjects such as the history of rating agencies and the roles played by smaller agencies to present a well-rounded portrait. Reports on one of the key causes of the 2008 financial crisis: agencies that failed to understand how to analyze financial products Describes inherent business model and pricing conflicts that compromise the independence of credit rating agencies Reveals how rating agencies large and small, regulatory bodies, and vested interests interact in setting fees and policies

Author: Giulia Mennillo
Publisher:
ISBN: 9781788211932
Category :
Languages : en
Pages : 240

View

Book Description
This short book introduces and explores the complex world of the credit rating industry: how it works, how it has evolved, the role it played in the financial crisis, and how it is regulated. Giulia Mennillo shows, as constitutive actors of global financial capitalism, CRAs have a social and political relevance that reaches well beyond finance.

Author: Sabrina Schleimer
Publisher: GRIN Verlag
ISBN: 3668779430
Category : Business & Economics
Languages : en
Pages : 9

View

Book Description
Seminar paper from the year 2018 in the subject Business economics - Investment and Finance, grade: 1,7, University of Strathclyde (Business School), course: International Financial Markets and Banking, language: English, abstract: This assignment will examine whether credit rating agencies can be regarded as useful. In order to do so, two given academic papers will be analysed and discussed, supplemented by further academic literature. The first of the two is a working paper by Efraim Benmelech called “Credit Ratings: Qualitative Versus Quantitative Information”. The second one is called “What’s Wrong with Credit Ratings” and written by Frank Partnoy. Before looking at these papers in greater detail, it is important to provide a general definition of CRAs. Gavras defines CRAs as “private companies [which] assess credit risk for companies and governments seeking to take out loans and issue fixed-income securities”. Arnold states that this risk assessment comes in the form of a rating, which represents the CRAs’ opinion of the rated entity’s creditworthiness, i.e. its “ability to repay its debt”. Both Gavras and Arnold remark that the rating ultimately affects the price and interest rate paid by the borrower on the debt instrument. Having generally defined CRAs, the authors of the two given papers also provide their own views. Both Benmelech and Partnoy agree with Gavras regarding the importance of CRAs in today’s credit markets and the strong influence these agencies have. They also agree that CRAs played a major part in the 2007/08 financial crisis. In his paper, Benmelech evaluates rating by S&P Global Ratings Inc. and concludes that they are vastly quantitative and, thus, can easily be predicted and substituted “by an algorithm that uses just ten financial variables”. On a similar note, Partnoy believes that rating methodologies are highly uninformative, that numerous reforms after the financial crisis have failed, and that the unchanged overreliance of investors and regulators on these ratings should be reduced.

Author: Richard M. Levich
Publisher: Springer Science & Business Media
ISBN: 1461509998
Category : Business & Economics
Languages : en
Pages : 380

View

Book Description
Ratings, Rating Agencies and the Global Financial System brings together the research of economists at New York University and the University of Maryland, along with those from the private sector, government bodies, and other universities. The first section of the volume focuses on the historical origins of the credit rating business and its present day industrial organization structure. The second section presents several empirical studies crafted largely around individual firm-level or bank-level data. These studies examine (a) the relationship between ratings and the default and recovery experience of corporate borrowers, (b) the comparability of credit ratings made by domestic and foreign rating agencies, and (c) the usefulness of financial market indicators for rating banks, among other topics. In the third section, the record of sovereign credit ratings in predicting financial crises and the reaction of financial markets to changes in credit ratings is examined. The final section of the volume emphasizes policy issues now facing regulators and credit rating agencies.

Author: Am Best
Publisher: Independently Published
ISBN:
Category :
Languages : en
Pages : 830

View

Book Description
The Industry - A History of the Credit Rating Agencies is an account of American ingenuity, of an industry that originated in the United States and remains rooted there even as its branches spread across the globe. This is the story of enterprising men and women who met economic crises with optimism and determination. Today's agencies continue to adapt to a changing global economy.

Author: Herwig Langohr
Publisher: John Wiley & Sons
ISBN: 0470714352
Category : Business & Economics
Languages : en
Pages : 524

View

Book Description
Credit rating agencies play a critical role in capital markets, guiding the asset allocation of institutional investors as private capital moves freely around the world in search of the best trade-off between risk and return. However, they have also been strongly criticised for failing to spot the Asian crisis in the early 1990s, the Enron, WorldCom and Parmalat collapses in the early 2000s and finally for their ratings of subprime-related structured finance instruments and their role in the current financial crisis. This book is a guide to ratings, the ratings industry and the mechanics and economics of obtaining a rating. It sheds light on the role that the agencies play in the international financial markets. It avoids the sensationalist approach often associated with studies of rating scandals and the financial crisis, and instead provides an objective and critical analysis of the business of ratings. The book will be of practical use to any individual who has to deal with ratings and the ratings industry in their day-to-day job. Reviews "Rating agencies fulfil an important role in the capital markets, but given their power, they are frequently the object of criticism. Some of it is justified but most of it portrays a lack of understanding of their business. In their book The Rating Agencies and their Credit Ratings, Herwig and Patricia Langohr provide an excellent economic background to the role of rating agencies and also a thorough understanding of their business and the problems they face. I recommend this book to all those who have an interest in this somewhat arcane but extremely important area." -Robin Monro-Davies, Former CEO, Fitch Ratings. "At a time of unprecedented public and political scrutiny of the effectiveness and indeed the basic business model of the Credit Rating industry, and heightened concerns regarding the transparency and accountability of the leading agencies, this book provides a commendably comprehensive overview, and should provide invaluable assistance in the ongoing debate." -Rupert Atkinson, Managing Director, Head of Credit Advisory Group, Morgan Stanley and member of the SIFMA Rating Agency Task Force "The Langohrs have provided useful information in a field where one frequently finds only opinions or misconceptions. They supply a firm base from which to understand changes now underway. A well-read copy of this monograph should be close to the desk of every investor, issuer and financial regulator, legislator or commentator." -John Grout, Policy and Technical Director, The Association of Corporate Treasurers

Author: Andrea Miglionico
Publisher: Edward Elgar Publishing
ISBN: 1786439948
Category : LAW
Languages : en
Pages : 360

View

Book Description
The global crisis revealed that credit rating agencies (CRAs) are capable of bringing about potential distortions in the financial sector, thereby resulting in a reduction in market confidence which, in turn, influences negotiations and expectations. CRAs need to be held accountable for lack of transparency and inaccurate ratings, however the existing regulatory framework does not secure adequate investor protection. This book provides a new and important contribution to research in the area, at a crucial time in the debate around financial regulation and investment regimes.

Author: Aline Darbellay,
Publisher: Edward Elgar Publishing
ISBN: 085793936X
Category : Business & Economics
Languages : en
Pages : 296

View

Book Description
øŠAline Darbellay analyzes the obvious system relevance of credit rating agencies in depth and assesses the possible options for regulatory responses to this systemic issue. Thereby, the book is based on a fruitful comparative legal approach and formul

Author: Daniel Cash
Publisher: Springer Nature
ISBN: 3030716937
Category : Business & Economics
Languages : en
Pages : 151

View

Book Description
This book details the difference between the two rating industries, but this difference is converging all the time. The concept of investing in a more responsible and sustainable manner is drawing in some of the world’s leading investors and, with it, regulations and policies are developing at the highest levels. However, the market is not getting what it needs to fully submit to the concept of responsible investing. It has called for more to be done from those tasked with injecting information into their processes, and two industries in particular have been identified as being natural partners. It has been suggested that they are on a collision course to serve the mainstream investor, and in this book, that collision course is contextualised, explained, presented, and finally its outcome predicted.

Author: Moritz Meyer
Publisher: GRIN Verlag
ISBN: 3668709491
Category : Business & Economics
Languages : en
Pages : 8

View

Book Description
Essay from the year 2018 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 69%, University of Strathclyde, language: English, abstract: Credit rating agencies are defined by Dittrich (2007) as companies which provide an opinion about the credit worthiness of a particular company, security or obligation by rating them on the basis of several parameters which are traditionally not publicly known. They also rate bonds issued by governments and municipal bonds specifying their ability to service their debts. On the contrary, according to Partnoy (2017) they usually provide an alphabetical letter score, which symbolises the forward-looking opinion of the credit rating agency on the credit worthiness of the rated obligor on a specific date. Therefore, the credit rating agencies are able to reduce information asymmetry by providing useful information to participants in debt markets and potential investors, which makes the credit rating agencies highly important as claimed by Utzig (2010). This transparency of information would otherwise not be available. On the other hand, Benmelech (2017) describes credit rating agencies as reputational intermediaries that bridge the information gap between issuers and investors by their ability to produce and accumulate credible information about debt issues. The score awarded by rating agencies enables the investor to decide whether or not to invest their money. The credit rating agency market is, as pointed out by Benmelech (2017), dominated by three big players as an oligopoly. Research by Partnoy (2017) and ESMA (2016) discovered that Moody's Investors Service Plc. and S&P Global Ratings Inc. (S&P) control the market with around 80 percent market share followed by Fitch Ratings Inc. which controls a further 15 percent.