Public and Private Uses of Credit Ratings

Capital Markets Institute Policy Series, 2005

47 Pages Posted: 28 Jun 2010 Last revised: 30 Jun 2010

Date Written: August 1, 2005

Abstract

The purpose of this paper is to assess the framework in which competing views concerning the appropriate approach to the regulation of credit rating agencies, particularly following the collapse of Enron, have emerged. This paper considers four issues that have been raised in the context of investigating the role and importance of CRAs: (a) The Public use of Credit Ratings: that is, the incorporation of credit ratings into certain legislative and regulatory schemes; (b) The Private Use of Credit Ratings: that is, the incorporation of credit ratings into private financial and commercial contracts (including, in particular, the use of “ratings triggers” such as those implicated in the Enron collapse) beyond the specific use of credit ratings contemplated by debt issuers and credit rating agencies; (c) Alternatives to Credit Ratings: that is, other market mechanisms that might be used by regulators and in private contracts as a replacement or substitute for credit ratings; (d) Potential Liability of Credit Rating Agencies, particularly to third parties rather than the rated issuer.

Suggested Citation

Nicholls, Christopher C., Public and Private Uses of Credit Ratings (August 1, 2005). Capital Markets Institute Policy Series, 2005, Available at SSRN: https://ssrn.com/abstract=1625839

Christopher C. Nicholls (Contact Author)

University of Western Ontario ( email )

1151 Richmond Street
Suite 2
London, Ontario N6A 5B8
Canada

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