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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 6: THE UK REGIME

Andrea Miglionico

Extract

Chapter 6 examines the UK regulatory regime for CRAs. It is pointed that in the UK, regulators and legislators adopted a mixed system of principles and rules for credit rating agencies. This regulatory approach has been mainly influenced by EU law and international initiatives. The chapter also considers the regulatory measures introduced through the Financial Services Authority’s Turner Report: a set of guidelines aimed to reduce the inappropriate use of ratings and to secure financial soundness. It is observed that while the Turner Review can be regarded a first concrete attempt to provide measures as to how to regulate CRAs, even further, its impact on the ratings system was ultimately modest and above all needed to be implemented by more intrusive regulatory measures.

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