Gouvernance et conflits d’intérêts dans les agences de notation financière

The Credit Rating Agencies had a catalyzing impact in the crisis in contributing to the inflation of the home mortgage bubble. As judge and jury they played a key role in the issuance and sale of investments in subprime mortgages. Without their erroneous evaluations, the market would never have achieved the dimensions that it attained in this era. The lending banks would have, in effect, encountered a limit to their lending capacity at an earlier stage. Institutional failures form the root cause of massive, unresolved and poorly managed conflicts of interest in the Credit Rating Agencies. These conflicts were critical ingredients in the creation of the mortgage bubble that led to the global financial crisis. Four key governance issues can be identified : monopolistic structure of supply, issuer-pays revenue mode, advisory services provided by the Agencies and the obstacles in holding an Agency liable. Indeed, credit ratings of debt securities represent the rating agencies? opinions regarding their credit quality and are not a guarantee of quality. Ratings are not classified as a statement of fact but as an opinion shielded from liability by the US Constitution?s first amendment ?abridging the freedom of speech?. European legislation since the 2007 crisis attempted to regulate Agencies but did they successfully attack the problems of governance and conflicts ? Not only did it fail to combat the Credit Rating Agencies? monopoly ; it does not even challenge the issuer-pays system which is the origin of the conflicts problem to which alternatives are proposed. Three Agencies control 96% of a market that features numerous statutory and economic obstacles to competition and a significant overlapping shareholder structure. Thus, multiple statutory and economic obstacles make it difficult for newcomers to enter the market. As to economic obstacles, the credit rating agency must have a certain critical scale in order to enter the market. The monopolistic structure is all the more powerful since Moody?s and S&P have a direct and indirect overlapping shareholder base. These are relatively concentrated because the ten leading shareholders of S&P represent approximately 41% of the capital and twelve of Moodys? 76.25%. Among the principal shareholders, 38% of shares in S&P and 53% of shares in Moodys? are owned by identical institutions. Additionally, there are overlapping shareholdings in each other?s credit rating agencies. Furthermore, issuer-pays system has serious perverse effects. Issuer-pays is at the heart of the actual conflicts in the credit rating industry. An inherent conflict arises when the issuer pays a credit rating agency to have its own creditworthiness evaluated. This system of compensation results in compliant evaluations that are detrimental to putting investor?s interest first. Many other models are available, among which are proposed : compensation by investors which aims to eliminate conflicts and create transparency and increase market efficiency. A new investor-based compensation model involves the creation of a central European-EU platform on which issuers are obliged to publish their data and to which all CRA have access. We propose a new model which resolves both the problems of conflicts and the lack of product liability. In this model, all products issued in the market are accompanied by an evaluation, and the investor is free to choose the credit rating agency which is now competing for the investors? money instead of courting relationships with issuers. It can be anticipated that such a platform may lead to shrinking the issuer-pays model and that it will, consequently, change the nature of the industry of Credit Rating Agencies.