Credit Rating Agencies

Hiß, Stefanie; Nagel, Sebastian

doi:10.1093/acprof:oso/9780199683963.003.0009

Cited by 7 publications

(4 citation statements)

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“…The 2006 Capital Requirements Directive required banking supervisors to assess some aspects of CRAs' methodologies before allowing banks to use their ratings in calculating capital requirements, yet the European Commission (2006) admitted that in practice this measure too fell short of regulating CRAs. The pre-crisis regulatory framework steered clear of rating methodologies and procedures (Hiss and Nagel, 2014;Interview 20160316).…”

Section: Regulating Credit Rating Agencies' Methodologiesmentioning

confidence: 99%

The regulator's conundrum. How market reflexivity limits fundamental financial reform

Stellinga

Mügge

2017

Review of International Political Economy

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Financial firms' valuation approaches are key to financial market functioning. The financial crisis exposed fundamental faults in pre-crisis practices and the regulations that bolstered them. Critics pointed to reflexivity: financial markets have no solid anchor outside of market participants' assessments, which makes them inherently unstable. Reflexivity implies valuation techniques are performative: they shape rather than reflect risks. Critics thus called for root and branch reform: regulators needed to regain control over these valuation practices. In spite of a flurry of changes, progress on the reforms has been limited in precisely those domains where it seemed most necessary. We argue that this lack of progress does not persist in spite of market reflexivity, but because of it. Public prescriptiveness might mandate widespread use of deficient valuation routines, exacerbating their deleterious performative effects and implicating public authorities in future financial crises. In the regulator's conundrum, neither a hands-off approach to valuation approaches, nor an interventionist stance promises to be effective. Empirically, we show how reflexivity has obstructed fundamental reforms in the European Union in three key domains: credit ratings, liquidity regulation, and accounting standards. Market reflexivity itself is, therefore, crucial to understanding the limited regulatory reforms we have witnessed since the crisis.

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Section: Regulating Credit Rating Agencies' Methodologiesmentioning

confidence: 99%

The regulator's conundrum. How market reflexivity limits fundamental financial reform

Stellinga

Mügge

2017

Review of International Political Economy

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“…In the aftermath of the crisis, the US has formalized registration to facilitate market access for new NRSRO candidates further. The SEC has enhanced disclosure requirements for the registration process as a quality-safeguarding mechanism (Hiss and Nagel, 2014: 140). Also, the EU introduced a registration duty for credit rating agencies in the wake of global financial crisis reform efforts.…”

Section: Understandings Of Rating Implicit In Regulationsmentioning

confidence: 99%

“…Given that eliminating conﬂicts of interest altogether is out of reach under the current business model of ‘issuer-pays’, enhanced ‘disclosure’ requirements are treated as an alternative means to address the issue. While the EU adopts a more general approach, the US requires detailed descriptions depending on the type of conﬂicts of interest (Hiss and Nagel, 2014: 140).…”

Section: Understandings Of Rating Implicit In Regulationsmentioning

confidence: 99%

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A hard nut to crack: Regulatory failure shows how rating really works

Mennillo

Sinclair

2019

Competition & Change

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Credit rating agencies such as Moody’s and Standard & Poor’s are key players in the governance of global financial markets. Given the very strong criticism the rating agencies faced in the wake of the global financial crisis 2008, how can we explain the puzzle of their survival? Market and regulatory reliance on ratings continues, despite the shift from a light-touch to a mandatory system of agency regulation and supervision. Drawing on the analysis of rating agency regulation in the US and the EU before and after the ﬁnancial crisis, we argue that a pervasive, persistent and, in our view, erroneous understanding of rating has supported the never-ending story of rating agency authority. We show how treating ratings as metrics, private goods, and independent and neutral third-party opinions contributes to the ineffectiveness of rating agency regulation and supports the continuing authoritative standing of the credit rating agencies in market and regulatory practices.

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Ratingagenturen

Hiß¹,

Nagel²

2017

Finanzmarktsoziologie

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Credit Rating Agencies

Cited by 7 publications

References 0 publications

The regulator's conundrum. How market reflexivity limits fundamental financial reform

The regulator's conundrum. How market reflexivity limits fundamental financial reform

A hard nut to crack: Regulatory failure shows how rating really works

Ratingagenturen

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