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The role of ratings in structured finance: issues and implications

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  • Bank for International Settlements

Abstract

Introduction In May 2003, the Committee on the Global Financial System (CGFS) decided to establish a Working Group on Ratings in Structured Finance to explore the role of rating agencies in the rapidly evolving markets for structured finance instruments. To facilitate a better understanding of this role and of structured finance markets more broadly, the Working Group was mandated to identify and explain methodological differences that exist between the rating of structured finance instruments and more traditional credit products, and to explore the various methodological and organisational challenges involved in rating structured finance products. This report documents the Working Group's findings, complementing earlier work by the CGFS and other official forums, such as CGFS (2003) and Joint Forum (2004b). It highlights several of the characteristics of structured products, challenges arising for the rating agencies and other market participants, and implications for central banks and investors. The report is based on the Group's discussions, written contributions by Group members on a number of technical topics, and series of interviews with rating agency officials and other participants in the structured finance markets.

Suggested Citation

  • Bank for International Settlements, 2005. "The role of ratings in structured finance: issues and implications," CGFS Papers, Bank for International Settlements, number 23, december.
    • Handle: RePEc:bis:biscgf:23
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    References listed on IDEAS

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    1. Raynes, Sylvain & Rutledge, Ann, 2003. "The Analysis of Structured Securities: Precise Risk Measurement and Capital Allocation," OUP Catalogue, Oxford University Press, number 9780195152739.
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    Cited by:

    1. Mario, Cuevas, 2007. "A Practical Guide to the Assessment of the Vulnerability of the Non-Financial Private Sector," MPRA Paper 1375, University Library of Munich, Germany.
    2. Gabriele Galati & Philip Wooldridge, 2009. "The euro as a reserve currency: a challenge to the pre-eminence of the US dollar?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 1-23.
    3. Byström, Hans N.E., 2008. "The Microfinance Collateralized Debt Obligation: A Modern Robin Hood?," World Development, Elsevier, vol. 36(11), pages 2109-2126, November.
    4. Abel Elizalde, 2006. "Credit Risk Models IV: Understanding and Pricing CDOs," Working Papers wp2006_0608, CEMFI.
    5. Forster, Josef, 2008. "The Optimal Regulation of Credit Rating Agencies," Discussion Papers in Economics 5169, University of Munich, Department of Economics.
    6. Gökçer Özgür & Korkut Alp Ertürk, 2013. "Endogenous Money in the Age of Financial Liberalization," Review of Political Economy, Taylor & Francis Journals, vol. 25(2), pages 327-347, April.
    7. Joshua Coval & Jakub Jurek & Erik Stafford, 2009. "The Economics of Structured Finance," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 3-25, Winter.
    8. Michel Aglietta & Ludovic Moreau & Adrian Roche, 2009. "The Crux of the Matter: Ratings and Credit Risk Valuation at the heart of the Structured Finance Crisis," Working Papers hal-04140892, HAL.
    9. Panagiotis K. Staikouras, 2012. "A Theoretical and Empirical Review of the EU Regulation on Credit Rating Agencies: In Search of Truth, Not Scapegoats," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 21(2), pages 71-155, May.
    10. Zimmermann, Heinz, 2007. "Credit risk transfer, hedge funds, and the supply of liquidity," Working papers 2007/20, Faculty of Business and Economics - University of Basel.
    11. Ingo Fender & Janet Mitchell, 2005. "Structured finance: complexity, risk and the use of ratings," BIS Quarterly Review, Bank for International Settlements, June.

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