Regulating Credit Rating Agencies in the European Union: A Critical First Assessment of the European Commission Proposal

2009 ◽  
Author(s):  
Fabian Amtenbrink ◽  
Jakob de Haan
Keyword(s):  
European Union ◽  
European Commission ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
The European Union ◽  
Rating Agencies

The Evolution of the Liability of Credit Rating Agencies in the United States and in the European Union: Regulation after the Crisis

2018 ◽  
Vol 15 (2) ◽  
pp. 339-402
Author(s):  
Chiara Picciau
Keyword(s):  
United States ◽  
European Union ◽  
Credit Rating ◽  
Burden Of Proof ◽  
Case Law ◽  
The United States ◽  
Credit Rating Agencies ◽  
The European Union ◽  
Rating Agencies ◽  
Arbitrage Opportunities

Credit rating agencies have assessed the creditworthiness of issuers and debt instruments for over a century. Nevertheless, in the United States and in the European Union a first regulation of rating services was passed only at the beginning of the twenty-first century, respectively in 2006 and 2009. Statutory liability rules were later adopted in the United States with the Dodd-Frank Act of 2010 and in the European Union with Regulation (EU) no 462/2013. Despite some similarities between the American and European existing discipline, significant differences still exist and pave the way for regulatory arbitrage opportunities in the ratings market. The reasons for divergence are clearly historically based and derive, in part, from the different traditions of the two legal systems. Accordingly, this article compares the evolution of the US regulatory framework and case law on the liability of rating organizations towards investors with the uniform rules adopted by the European Union since 2009, absent a comparable case law at the European level. It is argued that, in both systems, while it is easier to establish liability in case of intent, burden of proof rules generally place a significant, if not insurmountable, obstacle to damage compensation for investors.

scholarly journals The Role of Credit Rating Agencies in Sovereign Debt Markets

2018 ◽  
pp. 146-166
Author(s):  
Aline Darbellay
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Credit Ratings ◽  
Credit Rating Agencies ◽  
Past Century ◽  
The European Union ◽  
Rating Agencies ◽  
Sovereign Credit Ratings

Since the global financial crisis of 2007-2009, the leading credit rating agencies (CRAs) have faced an increasing level of legal and regulatory scrutiny in the United States (US) and in the European Union (EU). This chapter sheds light on the promise and perils of sovereign credit ratings in the light of the European sovereign debt crisis. The leading CRAs have been blamed for providing investors with inaccurate credit ratings, facing inappropriate incentives and lack of oversight. This chapter addresses the evolving function performed by CRAs over the past century. Traditionally, CRAs are private market actors assessing the creditworthiness of borrowers and debt instruments. Since the first sovereign bond ratings assigned in 1918, the rating business has grown in size and importance. Sovereign ratings supposedly predict financial distress of governments. Their role has shifted over the last four decades. Although they have repeatedly been blamed for being poor predictors of sovereign debt crises, CRAs continue to play a key role in modern capital markets.

scholarly journals Can credit rating agencies play a greater role in corporate governance disclosure?

2018 ◽  
Vol 18 (5) ◽  
pp. 954-964 ◽  
Author(s):  
Daniel Cash
Keyword(s):  
Corporate Governance ◽  
European Commission ◽  
Design Methodology ◽  
Credit Rating ◽  
Methodological Approach ◽  
Credit Rating Agencies ◽  
Content Type ◽  
Rating Agencies ◽  
Governance Disclosure ◽  
Comply Or Explain

Purpose The European Commission (EC) is currently examining methods to increase the effectiveness of corporate governance disclosures. This paper aims to examine whether the credit rating agencies (CRAs), both on account of their influence within the marketplace and also their methodological approach to rating Governance, may have a greater role to play in the EC achieving those particular objectives. Design/methodology/approach This paper is based upon a normative methodology, upon which the issue is contextualised and a proposal is put forward regarding a methodological alteration that can be instituted by the CRAs. Findings The paper finds that the CRAs may have a much greater role to play in meeting the objectives of the EC. Whilst the EC is focusing upon regulatory monitoring, the paper finds that there is a potential for a more efficient model within which the CRAs adapt their methodologies to include corporate governance disclosure into their rating processes. Originality/value In presenting the idea that the comply or explain principles put forward by the EC are proving to be somewhat ineffective, the paper contributes to the field by suggesting there are private endeavours which may add a sense of impact to disclosure proceedings, rather than the purely public regime being envisioned.

scholarly journals Role and Regulation of Credit Rating Agencies: The European Way

2019 ◽  
Vol 9 (1) ◽  
pp. 209
Author(s):  
Giusy Cavallaro ◽  
Annarita Trotta
Keyword(s):  
Financial Markets ◽  
Financial Regulation ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
The European Union ◽  
Ongoing Debate ◽  
Rating Agencies ◽  
Regulation And Supervision ◽  
Key Characteristics ◽  
Gray Areas

Credit Rating Agencies (CRAs) play a key role in the financial markets: credit rating provides useful information to investors, and it is also widely used for regulatory purposes. Nevertheless, after the subprime meltdown, CRAs have been strongly criticized for worsening the crisis by overrating structured products. Consequently, regulators are reforming the rating industry, worldwide. Therefore, this article investigates the changes regarding the role and regulation of CRAs, focusing on the European Union. To achieve this investigation, the study explores existing literature and examines the European reforms. The research contributes to the ongoing debate on the innovation in financial regulation, by highlighting the key-characteristics of the European approach to CRAs’ regulation and supervision. The results note distinct phases of regulation and highlight that certain gray areas relating to business model, overreliance and civil liability should not be ignored.

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