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Regulatory Governance of Credit Rating Agencies in the EU: The Perils of Pursuing the Holy Grail of Rating Accuracy

Published online by Cambridge University Press:  20 January 2017

Iris H-Y Chiu
Iris H-Y Chiu*
Affiliation:
Faculty of Laws, University College London
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Abstract

This paper argues that the EU Regulation of credit rating agencies is concurrently pursuing two objectives that conflict with and would undermine each other. One is the objective of enhancing rating accuracy, and the other is the objective of restoring market discipline in the wholesale investment markets for credit ratings as information goods. The Regulation places more emphasis on regulating for rating accuracy which has the effect of instituting a form of product regulation for credit ratings, raising the public interest profile of credit ratings. This paper argues that this is undesirable and is contrary to policy-makers’ endeavours to enhance market discipline for rating quality and the private accountability of credit rating agencies. EU policy-makers would eventually need to confront the underlying conflicting objectives in the Regulation so that a normatively coherent and consistent regulatory regime can be designed and implemented.

Type
Articles
Information
European Journal of Risk Regulation , Volume 4 , Issue 2 , June 2013 , pp. 209 - 226
Copyright
Copyright © Cambridge University Press 2013

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References

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