Credit Ratings Failures and Policy Options

Marco Pagano and Paolo Volpin

No 912, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: This paper examines the role of credit rating agencies in the subprime crisis that triggered the 2007-08 financial turmoil. The focus of the paper is on two aspects of ratings that contributed to the boom and bust of the market for asset-backed securities:rating inflation and coarse information disclosure. The paper discusses how regulation can be designed to mitigate these problems in the future. The suggestion is that regulators should require rating agencies to be paid by investors rather than by issuers (or at least constrain the way they are paid by issuers) and force greater disclosure of information about the underlying pool of securities.

Pages: 29 pages
Date: 2009, Revised 2009-09
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Credit ratings failures and policy options (2010)
Working Paper: Credit Ratings Failures and Policy Options (2009)
Working Paper: Credit Ratings Failures and Policy Options (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eie:wpaper:0912

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