In this issue:

This issue, sponsored by Rosa Abrantes-Metz, takes a global look at the vexing question of an essential—but contentious—oligopoly, the credit rating agencies. And while almost everybody agrees that CRAs are potentially problematic, very few seem to agree on how to analyze them—much less what changes (if any) should be made. And then there are numerous questions: Do antitrust rules apply? After all, dominance in itself is not illegal. And what about the difference between rating private and sovereign risks? We look at all these issues, propose a variety of approaches and, at the very least, clarify the muddy waters around CRAs.

Credit Rating Agencies – The European Perspective

Rosa Abrantes-Metz, Jan 28, 2014

Did Credit Rating Agencies Cause the European Sovereign Debt Crisis?

While I confess to being skeptical that a CRA would have the means to provoke a market reaction on sovereign debt, I am even more skeptical that it would have a reason to do so. Rosa Abrantes-Metz (Global Economics Group)

Bertrand Candelon, Axel Gautier, Nicolas Petit, Jan 28, 2014

Market Power in the Credit Rating Industry: State of Play and Proposal for Reforms

Our hypothesis is that rating over the cycle is a by-product of incumbent CRAs’ market power, held in an industry where competition takes place on quality, rather than on prices. Bertrand Candelon (Maastricht Univ.), Axel Gautier & Nicolas Petit (Univ. of Liege)

Paolo Palmigiano, Simone Pieri, Jan 28, 2014

Credit Rating Agencies: Change by Competition Law or Regulation?

But in an oligopoly, like the one here, it is in principle possible for the CRAs to be collectively dominant. Paolo Palmigiano (Sumitomo Electric Group) & Simone Pieri (ICLA Italia)

Credit Rating Agencies – The U.S. Perspective

Lawrence White, Jan 28, 2014

Regulating the Credit Rating Agencies? Less Would Be More

This essay will argue that public policy should remove the pedestal on which past policy has placed the major CRAs. Lawrence White (Sloan, NYU)

Mark Patterson, Jan 28, 2014

Looking at Credit Rating Agencies Through a Leegin Lens

The mismatch between competition and ratings accuracy is less surprising if we view the credit-rating agency market through a different lens than is typically used. Mark R. Patterson (Fordham University School of Law)

R. Shyam Khemani, Ritha Khemani, Jan 28, 2014

Reforming Credit Rating Agencies: More Competition, Less Regulation or Both? A Proposal for Moving Forward

The main thrust of the proposal is for the IMF to play a greater role in the credit rating process as it relates to sovereign debt. R. Shyam Khemani (Micra) & Ritha Khemani

Credit Rating Agencies: Brazil & South Africa

Claudio Ribeiro de Lucinda, Jan 28, 2014

Competition Between Credit Rating Agencies: A Brazilian Point of View

The current industry structure for credit rating agencies is more the result of the interplay of market forces and regulatory fiat than one naturally derived from comparative advantages. Claudio Ribeiro de Lucinda (University of São Paulo)

Trudi Makhaya, Jan 28, 2014

Global Reform of Credit Rating Agencies and Challengers From Emerging Markets

Global developments in policy towards CRAs favor adding constraints to their influence by reducing the weight placed on ratings in risk assessments and regulations and also through the introduction of competition. Trudi Makhaya (Competition Commission of South Africa)