Rating agencies

Role and influence of their sovereign credit risk assessment in the Eurozone

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In this article, the role of credit rating agencies (CRAs) during the 2010–11 EU sovereign debt crisis is assessed. It is concluded that rating agencies lag behind markets, that their business model is flawed, and that the lack of competition renders the big three CRAs with too strong a market position. The reliance on CRAs should be reduced by attaching less importance to them in prudential regulation and accounting standards. At the same time, more competition and transparency is needed to increase the quality of ratings. Finally, several policy options to change the ratings industry are discussed, including the creation of a network of small CRAs, delegation of sovereign debt ratings to the European Central Bank or the creation of a European rating agency.
Original languageEnglish
Pages (from-to)912-921
JournalJournal of Common Market Studies
Volume50
Issue number6
DOIs
Publication statusPublished - Nov 2012

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Eurozone
risk assessment
credit
rating
European Central Bank
Credit rating agencies
Rating agencies
Risk assessment
Credit risk
Euro zone
market position
debt crisis
Rating
indebtedness
transparency
EU
regulation

Cite this

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title = "Rating agencies: Role and influence of their sovereign credit risk assessment in the Eurozone",
abstract = "In this article, the role of credit rating agencies (CRAs) during the 2010–11 EU sovereign debt crisis is assessed. It is concluded that rating agencies lag behind markets, that their business model is flawed, and that the lack of competition renders the big three CRAs with too strong a market position. The reliance on CRAs should be reduced by attaching less importance to them in prudential regulation and accounting standards. At the same time, more competition and transparency is needed to increase the quality of ratings. Finally, several policy options to change the ratings industry are discussed, including the creation of a network of small CRAs, delegation of sovereign debt ratings to the European Central Bank or the creation of a European rating agency.",
author = "S.C.W. Eijffinger",
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Rating agencies : Role and influence of their sovereign credit risk assessment in the Eurozone. / Eijffinger, S.C.W.

In: Journal of Common Market Studies, Vol. 50, No. 6, 11.2012, p. 912-921.

Research output: Contribution to journalArticleScientificpeer-review

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