The Role of Credit Rating Agencies in the Establishment of Capital Standards for Financial Institutions in a Global Economy

2014 ◽  
Keyword(s):  
Financial Institutions ◽  
Global Economy ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
Rating Agencies

scholarly journals THE ROLE OF AUDIT AND CREDIT RATING AGENCIES IN THE ASSESSMENT OF COMPANY CREDITWORTHINESS WITH SPECIAL FOCUS ON BANKS

2019 ◽  
pp. 089
Author(s):  
Mirjana Jemović ◽  
Milica Đorđević ◽  
Jelena Radojičić
Keyword(s):  
Financial Institutions ◽  
Credit Rating ◽  
Fiscal Year ◽  
Credit Rating Agencies ◽  
Special Focus ◽  
Delayed Reaction ◽  
Rating Agencies ◽  
Crisis Events ◽  
Regulatory Bodies

Audit and credit rating agencies have a significant responsibility in assessing company creditworthiness and giving opinions on the client’s ability to continue business in the future, most often the next fiscal year. Responsibility is even greater when it comes to banks and their creditworthiness. The financial crisis of 2007 and the bankruptcy of a number of banks and other financial institutions imposed a need to seek accountability for the “delayed” reaction of regulatory bodies and significant fiscal consequences of the crisis. The aim of the paper is to evaluate the efficiency of credit rating agencies and external audit in assessing the creditworthiness of companies and banks, not for the purpose of finding their individual responsibilities, but to look at possible coordinated and joint actions to prevent future crisis events.

scholarly journals Information as a condition of justice in financial markets: The regulation of credit-rating agencies

2017 ◽  
Author(s):  
Boudewijn de Bruin
Keyword(s):  
Credit Risk ◽  
Financial Markets ◽  
Institutional Investors ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
Informational Needs ◽  
Sources Of Information ◽  
Rating Agencies ◽  
Mortgage Backed Securities

This chapter argues for deregulation of the credit-rating market. Credit-rating agencies are supposed to contribute to the informational needs of investors trading bonds. They provide ratings of debt issued by corporations and governments, as well as of structured debt instruments (e.g. mortgage-backed securities). As many academics, regulators, and commentators have pointed out, the ratings of structured instruments turned out to be highly inaccurate, and, as a result, they have argued for tighter regulation of the industry. This chapter shows, however, that the role of credit-rating agencies in achieving justice in finance is not as great as these commentators believe. It therefore argues instead for deregulation. Since the 1930s, lawgivers have unjustifiably elevated the rating agencies into official, legally binding sources of information concerning credit risk, thereby unjustifiably causing many institutional investors to outsource their epistemic responsibilities, that is, their responsibility to investigate credit risk themselves.

scholarly journals The Credit Rating Agencies and Their Role in the Financial System

2019 ◽  
Author(s):  
Lawrence J. White
Keyword(s):  
United States ◽  
Financial Markets ◽  
Financial Institutions ◽  
Credit Rating ◽  
Financial System ◽  
The United States ◽  
Credit Rating Agencies ◽  
Financial Instruments ◽  
Rating Agencies ◽  
System P

Despite extensive criticism, the major credit rating agencies (CRAs)—Moody’s, Standard & Poor’s, and Fitch—remain central entities in the financial markets of the United States and Europe, especially with respect to bonds and similar financial instruments. This chapter provides a discussion of the role that the CRAs continue to play in the financial system and how and why they play that role. After a brief overview of the CRAs as providers of information that lessens the problems of asymmetric information in lending/borrowing markets, the chapter discusses the expanded use of the CRAs’ ratings in the prudential regulation of financial institutions and the problems that contributed to the financial crisis of 2008. The chapter concludes with a discussion of the likely direction of the CRAs and their regulation.

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