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