The Failures of Credit Rating Agencies during the Global Financial Crisis – Causes and Possible Solutions

Abstract

Summary:

The adequacy of credit ratings is crucial for normal functioning of debt markets. Failures of credit rating agencies have strengthened the negative effects of global financial crisis, generating additional systemic risk. The errors of the agencies can be explained by many reasons as business models, conflicts of interest and absent or ineffective regulation of their activities. To overcome these major problems, we can apply different approaches. The best solution is to improve regulatory practices, combining it with limiting the regulatory status of rating agencies.