The Systemic Regulation of Credit Rating Agencies and Rated Markets

The Systemic Regulation of Credit Rating Agencies and Rated Markets

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Credit ratings have contributed to the current financial crisis. Proposals to regulate credit rating agencies focus on micro-prudential issues and aim at reducing conflicts of interest and increasing transparency and competition. In contrast, this paper argues that macro-prudential regulation is necessary to address the systemic risk inherent to ratings. The paper illustrates how financial markets have increasingly relied on ratings. It shows how downgrades have led to systemic market losses and increased illiquidity. The paper suggests the use of qratings mapsq and stress-tests to assess the systemic risk of ratings, and increased capital or liquidity buffers to manage such risk.IOSCO, 2004, a€œCode of Conduct Fundamentals for Credit Rating Agencies, a€ Technical Committee of the IOSCO, ... and Why Credit Rating Agencies Are Not Like Other Gatekeepers, a€ Research Paper No 07-46, Legal Studies Research Paperanbsp;...


Title:The Systemic Regulation of Credit Rating Agencies and Rated Markets
Author: Mr. Amadou N. R. Sy
Publisher:International Monetary Fund - 2009-06-01
ISBN-13:

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