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
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)
Our hypothesis is that rating over the cycle is a by-product of incumbent CRAsâ€™ 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)