Regulating Credit Rating Agencies after the Financial Crisis: The Long and Winding Road Toward Accountability

Capital Markets Institute Research Paper

57 Pages Posted: 19 Aug 2009

See all articles by Stephane Rousseau

Stephane Rousseau

Université de Montréal - Faculty of Law

Date Written: July 23, 2009


The credit crisis that started in the American mortgage subprime market in 2007 is having profound social and economic consequences. In this context, lawmakers, regulators, and commentators have questioned the role of rating agencies in the market turmoil. In light of the critiques, a strong consensus emerged that regulatory intervention was needed. The consensus was encapsulated in the Group of Twenty (G20) communiqué of April 2009 that stated that 'We have agreed on more effective oversight of the activities of Credit Rating Agencies, as they are essential market participants.' Thus, a number of reform initiatives are under way in Canada, Europe and the United States to address the concerns raised by credit rating agencies’ activities in the context of structured finance products.

The paper provides a critical assessment of the regulatory initiatives put forward on both sides of the Atlantic to address the problems which have affected the accuracy of the ratings as well as the integrity of the ratings process. The first part of the paper offers some background relating to the subprime credit crisis. The second part moves to an analysis of the role of CRAs in the context of the structured finance products. Finally, after having highlighted the failings of CRAs’ in the asset-backed securities market, the paper presents the reform initiatives. It offers a critical comparative examination of the strategies for enhancing the accountability and effectiveness of CRAs.

Keywords: credit ratings, rating agencies, structured finance, financial regulation

JEL Classification: G18, G28, G38, K22, K23

Suggested Citation

Rousseau, Stephane, Regulating Credit Rating Agencies after the Financial Crisis: The Long and Winding Road Toward Accountability (July 23, 2009). Capital Markets Institute Research Paper, Available at SSRN: or

Stephane Rousseau (Contact Author)

Université de Montréal - Faculty of Law ( email )

C.P. 6128 succ. centre-ville
Montreal, Quebec H3C 3J7


Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics