Chapter 14: Concluding remarks
Apart from the Big Three – Moody’s, Standard & Poor’s and Fitch – no other leading CRA has appeared as profitable since the emergence of the credit rating industry at the beginning of the twentieth century. Before the 1970s, the rating industry was still subject to private market forces. CRAs were neither significantly used in financial market regulations nor regulated. From the 1970s onwards, regulators increasingly incorporated regulatory references to ratings in their financial market regulations. Yet the rating industry itself remained unregulated. Recently, 2010 has marked a turning point in the rating industry. Regulators have been removing the rating-based regulations they developed over the last four decades. Moreover, lawmakers have decided to regulate CRAs similarly to other financial gatekeepers such as securities analysts and auditors. While tending to reduce over-reliance on certified ratings, lawmakers and regulators have nevertheless acknowledged the crucial role played by the leading CRAs in modern financial markets. After a century of existence, the rating industry has currently faced its most significant regulatory overhaul. The role of the leading CRAs in modern financial markets is a fascinating and challenging topic given their relevance on the global stage. With regard to the adoption of the US Dodd-Frank Act of 2010 and the EU CRA Regulation of 2009, a new era has begun where CRAs will be highly regulated in keeping with the crucial role they play in the financial system. Over the twentieth century, the use of ratings has significantly expanded given the regulatory environment in which they operate.
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