Description

The Independence of Credit Rating Agencies focuses on the institutional and regulatory dynamics of these agencies, asking whether their business models give them enough independence to make viable judgments without risking their own profitability.

Few have closely examined the analytical methods of credit rating agencies, even though their decisions can move markets, open or close the doors to capital, and bring down governments. The 2008 financial crisis highlighted their importance and their shortcomings, especially when they misjudged the structured financial products that precipitated the collapse of Bear Stearns and other companies.

This book examines the roles played by rating agencies during the financial crisis, illuminating the differences between U.S. and European rating markets, and also considers subjects such as the history of rating agencies and the roles played by smaller agencies to present a well-rounded portrait.

Key Features

  • Reports on one of the key causes of the 2008 financial crisis: agencies that failed to understand how to analyze financial products
  • Describes inherent business model and pricing conflicts that compromise the independence of credit rating agencies
  • Reveals how rating agencies large and small, regulatory bodies, and vested interests interact in setting fees and policies

Readership

Upper-division undergraduates and graduate students worldwide studying financial institutions, mergers & acquisitions, international finance, and money & banking. Professionals worldwide working in these areas.

Table of Contents

  • Dedication
  • Foreword
  • Acknowledgements
  • List of Tables
  • List of Figures
  • Introduction
  • Chapter one. Rating Agencies and the Rating Service
    • 1.1 Introduction
    • 1.2 The Rating Service
    • 1.3 Rating Service Users
    • 1.4 Conclusions
  • Chapter two. Rating and Financial Markets
    • 2.1 Introduction
    • 2.2 The Impact of New Ratings on Issuers and Issues
    • 2.3 The Impact of Rating Changes on Issuers and Issues
    • 2.4 Regulation in the Rating Sector
    • 2.5 The Great Financial Crisis and the Role of Rating Agencies
    • 2.6 Conclusions
  • Chapter three. The Rating Market
    • 3.1 Introduction
    • 3.2 History of the Rating Industry
    • 3.3 Entry Barriers for Newcomers
    • 3.4 The Current Rating Market
    • 3.5 The Evolution of Competition in the Rating Market
    • 3.6 Conclusion
  • Chapter four. Economic and Financial Equilibrium of Rating Agencies
    • 4.1 Introduction
    • 4.2 Balance Sheet
    • 4.3 Income Statement
    • 4.4 Cash Flow Statement
    • 4.5 Conclusions
  • Chapter five. Rating Agencies’ Pricing Policies
    • 5.1 Introduction
    • 5.2 Pricing Policies for Information Providers and Rating Agencies
    • 5.3 Rating Agency Fees
    • 5.4 Issuer and User Fee Models
    • 5.5 Pricing Policies for Issuer and User Fee Models
    • 5.6 Conclusions
  • Chapter six. Organizational Structure and Rating Agency Independence
    • 6.1 Introduction
    • 6.2 Ethical Codes
    • 6.3 Information Flows and Monitoring Methods
    • 6.4 Legal Status and Ownership Concentration
    • 6.5 Group Affiliation
    • 6.6 Public Intervention
    • 6.7 Conclusions
  • Chapter seven. The Economic Independence of Rating Agencies
    • 7.

Details

No. of pages:
200
Language:
English
Copyright:
© 2014
Published:
Imprint:
Academic Press
Electronic ISBN:
9780124047365
Print ISBN:
9780124045699

About the author

Gianluca Mattarocci

Winner of multiple research awards for his investigations in banking and finance, Gianluca Mattrrocci has published on subjects as diverse as real estate finance, bibliometrics, and hedge funds. His work on rating agencies derives from his investigations of the Italian banking industry and their portfolios.

Reviews

"This book provides a detail exposition of credit rating agency industry with a global emphasis. The coverage of non-US credit agencies and their respective markets is excellent." --Kam C. Chan, Western Kentucky University

"Mattarocci's interesting monograph provides new insights into the workings of the ratings industry by exploring the agencies' business models, organisational structures and, most importantly, their independence." --Sandra Einig, Oxford Brookes University

"Rating agencies play an important role in modern finance. Mattarocci is the first to provide a comprehensive overview of the business model of rating agencies. This knowledge is crucial in understanding the recent financial crisis as well as the current regulatory regime." --Peter Posch, University of Ulm