Credit ratings failures : causes and policy options

Working papers:

Title:: Credit ratings failures : causes and policy options
Author(s):: Pagano, Marco
Volpin, Paolo
Date:: 2009
Type:: Working papers
Department:: Italian Academy
Permanent URL:: http://hdl.handle.net/10022/AC:P:10045
Series:: Italian Academy Fellows' Seminar Working Papers
Publisher:: Italian Academy for Advanced Studies in America, Columbia University
Publisher Location:: New York
Abstract:: This paper examines the role of credit rating agencies in the subprime crisis, which was at the outset of the ongoing financial turmoil. The focus of the paper is on two aspects that contributed to the boom and bust of the market for asset-backed securities: rating inflation and coarse information disclosure. The paper discusses how regulation can be designed to mitigate these problems in the future. The suggestion is that regulators should require rating agencies to be paid by investors rather than by issuers (or at least constrain the way they are paid by issuers) and force greater disclosure of information about the underlying pool of securities.
Subject(s):: Finance
Economics, Commerce-Business