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http://ssrn.com/abstract=1605222
 
 

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Credit Rating Agencies, Structured Securities, and the Way Out of the Abyss


Lois R. Lupica


University of Maine School of Law

November 1, 2008

Review of Banking and Financial Law, Vol. 28, p. 639, 2008

Abstract:     
The article examines the role of credit rating agencies (CRAs) in the evolving financial markets, and particularly in connection with the structured finance markets. The movement away from relationship-based lending based on trust, to the less personal capital markets, makes an objective assessment of creditworthiness essential to the structure of legitimate transactions, as well as to the credibility of investor decision-making. Yet, the financial crisis of 2008-2009 revealed that the CRAs seriously underestimated the risk of many complex securities that they rated. As CRAs have devoted a greater share of their resources to develop methods of rating these progressively more exotic securities, their influence over the market has grown exponentially. As a result, the issue of the accuracy of credit ratings and the accountability of CRAS is increasingly critical. The article reviews the voluntary reforms adopted by the largest CRAs, and calls for a more robust regulatory infrastructure and dramatic modification of CRA practices.

Number of Pages in PDF File: 37

Keywords: Credit Rating Agencies, Securitization, Structure Finance, Financial reform, Credit Ratings, Moody’s, Regulatory Reform, Financial Crisis, NRSROs

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Date posted: May 12, 2010  

Suggested Citation

Lupica, Lois R., Credit Rating Agencies, Structured Securities, and the Way Out of the Abyss (November 1, 2008). Review of Banking and Financial Law, Vol. 28, p. 639, 2008. Available at SSRN: http://ssrn.com/abstract=1605222

Contact Information

Lois R. Lupica (Contact Author)
University of Maine School of Law ( email )
246 Deering Avenue
Portland, ME 04102
United States
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