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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 11: FINDINGS OF THE RESEARCH

Andrea Miglionico

Extract

Chapter 11 provides concluding observations along with a summary of presented policy and regulatory recommendations for reform. The findings of this analysis show that 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. Further, it is stressed that CRAs should be subject to professional standards similar to those applicable to other information intermediaries such as auditors and financial analysts. On this view, CRAs should be made responsible for their investment certification because of their fundamental role in the evaluation of credit risk and their influence on confidence and decisions in the financial markets.

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