Vivian van Breemen

17 ratings, rather than those that reflect the securities true credit quality7. The conflict of interest between the issuer and CRA is broadly described in lpi ht eernaot umr ee nboyn t. wT oh ed or amt ii nn ga nsthtohpepoi rni ge st: ht ehoer “yr as tt iant ge ss ht hoaptp ii snsgu”ear ns da r“ er a at ibnl ge ct ao t es roilni cgi ”t preliminary credit ratings from numerous CRAs and only select those of their liking. Only the selected CRAs benefit from this process as they receive the full pc oany mt r aecntt i no f rteht ue rins.s Fuoe lrlso, wwi nhgi l et htihset hoet oh reyr,sorneec emi vi eg hot nal rygau emt ihnaot rt hf eeei sf os ur ebrrceaanc hp uo tf pr artei snsgusr)e, roant hCeRrAt sh taon aas sriagtni nrga ttihnagts stohlaetl ys artei fslfeyc tt hs et hwei suhnedseor fl yt hi negi scsrue ed ri t( qi . eu. a, il ni t fyl aot fe da sc er ec du irti trya. t Ti nhge s rt aa nt i dn ag r cdast be raisnegd tohne oc or ymbpue itlidt isv eu pp or ens st hu irse aosf tChReAi rspme ei gr sh. tI na dpjaurstti ctuhleairr, they might try to match their standards (i.e., by inflating their ratings) to those of their competitors to reduce the chance of rating shopping behavior by issuers. The unfolding of the global financial crisis has revealed the misfunctioning of the ss ek ci lul sr oi t fi zCaRt Ai osnh amv ae rbkeeet n. Twhi de esl yc rqeueensi tni go nceadp tahbei lriet iaef st e or . fC oo rni sgei nq auteonr tsl ya, pn od l itchyemraakt ei nr gs aTnhde Dreogdudla-FtorarsnkhaAvcet created more and stricter rules and regulations thereafter. 8 was implemented in the US market and, similarly, a variety of regulations have been proposed in the EU9. These rules and regulations have, aI nmtohne gUs St omt ha er kr et th, itnhgi ss , ws oa us gdhotnteo brye di nuccree at hs ien ag bt irl ai tnys op fa ri sesnuceyr so ft oi nsf oh romp af ot iro rnaitni ntghse. rating market. In the EU, issuers are now required by regulation to disclose at 7 a Tn hd eWd oo ludbCtos mr e, gCaRr dAisn wg tehr ee reexl ti ar ebmi l iet yl y olfact re eidni tardaj tui ns tgi sn gd at theesi rb ac cr ek dt iot br ae tf oi nr ge twh he eGnF tCh. eF ocro emx pa amnpi el es , ei nx pt he er i ceanscee od f sEenvreor ne difficulties (see e.g., Boot, 2006). 8 SuDbosdedct-iFornan1k5GA. ct, 2010, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Section 941 9 (ERCe)guNloat1io0n60(E/U20) 0N9oo4n62C/R2A0s1. 3 of the European Parliament and of the Council of 21 May 2013 amending Regulation Chapter 1 - General Introduction

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