The Systemic Regulation of Credit Rating Agencies and Rated Markets
AbstractCredit ratings have contributed to the current financial crisis. Proposals to regulate credit rating agencies focus on micro-prudential issues and aim at reducing conflicts of interest and increasing transparency and competition. In contrast, this paper argues that macro-prudential regulation is necessary to address the systemic risk inherent to ratings. The paper illustrates how financial markets have increasingly relied on ratings. It shows how downgrades have led to systemic market losses and increased illiquidity. The paper suggests the use of â€˜ratings mapsâ€™ and stress-tests to assess the systemic risk of ratings, and increased capital or liquidity buffers to manage such risk.
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Bibliographic InfoArticle provided by World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE in its journal World Economics Journal.
Volume (Year): 10 (2009)
Issue (Month): 4 (October)
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Other versions of this item:
- Amadou N. R. Sy, 2009. "The Systemic Regulation of Credit Rating Agencies and Rated Markets," IMF Working Papers 09/129, International Monetary Fund.
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- Erik R. Fasten & Dirk Hofmann, 2010. "Two-sided Certification: The market for Rating Agencies," SFB 649 Discussion Papers SFB649DP2010-007, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Duan, Jin-Chuan & Van Laere, Elisabeth, 2012. "A public good approach to credit ratings – From concept to reality," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3239-3247.
- Vassiliki L. Papaikonomou, 2010. "Credit rating agencies and global financial crisis: Need for a paradigm shift in financial market regulation," Studies in Economics and Finance, Emerald Group Publishing, vol. 27(2), pages 161-174, June.
- 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.
- Chiwitt, Ulrich, 2014. "Ratingagenturen - Fluch oder Segen? Eine kritische Bestandsaufnahme," Arbeitspapiere der FOM 48, FOM Hochschule für Oekonomie & Management.
- Clyde Goodlet, 2010. "Too Big to Fail: A Misguided Policy in Times of Financial Turmoil," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 311, October.
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