Chapter

How, If At All, Should Credit Ratings Agencies (CRAs) Be Regulated?<sup>1</sup>

C. A. E. Goodhart

in Time for a Visible Hand

Published in print January 2010 | ISBN: 9780199578801
Published online February 2010 | e-ISBN: 9780191723285 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199578801.003.0009

Series: Initiative for Policy Dialogue

How, If At All, Should Credit Ratings Agencies (CRAs) Be Regulated?1

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This chapter examines how, if at all, should credit rating agencies be regulated. The author argues that most proposed regulation of CRAs is either useless or likely to be counterproductive. The CRAs were dragged into the broader regulatory framework (e.g., Basel II) against their wishes and, perhaps, as the U.S. Securities and Exchange Commission has suggested, they should now be removed from this role. Since CRAs are essentially forecasters, the author proposes a small, independent (but publicly funded) Credit Rating Agency Assessment Centre (CRAAC), paid by the industry, to provide a public evaluation of all the CRA forecasts.

Keywords: credit rating agencies; ratings of structured products; rating transitions; evaluating credit rating agencies

Chapter.  9515 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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