The New Politics of Transatlantic Credit Rating Agency Regulation
The Fate of Transnational Financial Regulation, Routledge 2013, Tony Porter, ed., Forthcoming
23 Pages Posted: 21 Nov 2012 Last revised: 27 Feb 2014
Date Written: November 21, 2012
In the years immediately leading up to the global financial crisis, and shortly thereafter, scholars envisaged a possible “convergence” of rules relating to the cross-border regulation of credit rating agencies (CRAs). This paper argues, however, that any full harmonization of approaches will be difficult due to varying political and economic realities motivating CRA regulation on both sides of the Atlantic. To demonstrate, this Article traces the regulation of CRAs from the early 1900s in the United States through today’s European debt crisis. It shows that Europe’s incentives to regulate CRAs have grown as its economy has shifted from bank to capital market finance, as globalization internationalized the consequences of what was weak CRA governance in the United States, and as CRA ratings of sovereign debt have come to more directly impact EU officials’ ability to manage responses to the Eurozone crisis. In the wake of these developments, European regulators are poised to adopt measures that may move beyond not only U.S. approaches, but also the consensus expressed in G-20 declarations and the IOSCO Code of Conduct.
Keywords: credit rating agencies, SEC, EU, IOSCO, CRA 1, 2 and 3, Dodd-Frank
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