Are we too reliant on credit ratings?

Author: Danielle Myles | Published: 30 Nov 2012
Mark Adelson
Warnings about regulatory reliance on credit ratings are not a 21st century development, explains Mark Adelson, former chief credit officer at Standard & Poor's

Credit rating agencies (CRAs) attracted a fair chunk of the blame for the global financial crisis. And the Dodd-Frank Act responded accordingly, subjecting the sector to stricter oversight, enforcement and disclosure requirements.

Dodd-Frank's most revolutionary change affecting CRAs, however, is the removal of rating references in regulations. Given the mass default of triple A-rated securitisations during the financial crisis, the search for other measures of creditworthiness is defendable.

But the potential problem of regulatory reliance was first identified in 2000. It followed the 1999 proposal of the...