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The Governance of Credit Rating Agencies

Regulatory Regimes and Liability Issues

Andrea Miglionico

The global crisis revealed that credit rating agencies (CRAs) are capable of bringing about potential distortions in the financial sector, thereby resulting in a reduction in market confidence which, in turn, influences negotiations and expectations. CRAs need to be held accountable for lack of transparency and inaccurate ratings, however the existing regulatory framework does not secure adequate investor protection. This book provides a new and important contribution to research in the area, at a crucial time in the debate around financial regulation and investment regimes.
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Chapter 5: THE EU REGIME

Andrea Miglionico

Extract

Chapter 5 analyzes the European regulatory response to the shortcomings associated with rating activities. It is argued that the adoption of Regulation No 1060/2009 represented the transition of the rules governing CRAs from a self-regulatory to a government-regulated framework. The EU legislation on CRAs designates specific rules that are intended to improve disclosure and set forth a stringent regime for rating agencies. It set out a legally binding pan-European authorization regime for CRAs by targeting the problem of conflicts of interest and ratings quality. This chapter also discusses how harmonized rules could eliminate differential treatment under the law and introduce on-going supervision with accountable responsibility for rating agencies.

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