An Economic Analysis of Credit Rating Agency Business Models and Ratings Accuracy

Financial Services Authority Occasional Paper 41, November 2011

40 Pages Posted: 22 Mar 2012

See all articles by Andrei Medvedev

Andrei Medvedev

Government of the United Kingdom - Financial Services Authority

Damien Fennell

Government of the United Kingdom - Financial Services Authority

Date Written: November 15, 2011

Abstract

This paper analyses, from an economic perspective, the viability of different business models in providing accurate ratings of credit risk to investors. It considers several different business models for credit ratings agencies (CRAs), the currently dominant issuer-pays model, the investor-pays model, a public model and a platform model. This paper aims to generally inform the debate on CRAs and their business models; it does not make specific policy recommendations, nor is it a response to specific policy consultation.

Keywords: Credit ratings agencies, CRAs, ratings accuracy, business models

JEL Classification: G1, G28

Suggested Citation

Medvedev, Andrei and Fennell, Damien, An Economic Analysis of Credit Rating Agency Business Models and Ratings Accuracy (November 15, 2011). Financial Services Authority Occasional Paper 41, November 2011. Available at SSRN: https://ssrn.com/abstract=2026432

Andrei Medvedev (Contact Author)

Government of the United Kingdom - Financial Services Authority ( email )

25 The North Colonnade
Canary Wharf
London E14 5HS
United Kingdom

HOME PAGE: http://andrei-medvedev.blogspot.co.uk/

Damien Fennell

Government of the United Kingdom - Financial Services Authority ( email )

25 The North Colonnade
Canary Wharf
London E14 5HS
United Kingdom

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