Daily Archives: January 20, 2016

Role of credit rating agencies

Credit rating agencies have been criticized for their role in the 2007 sub-prime crisis, which led to the global financial crisis, but it wasn’t until a recent lawsuit exposed their internal emails that it became clear to what extent they were responsible.

While the global financial crisis can’t be blamed on any one in particular, there was widespread criticism for the role that credit rating agencies played in the credit bubble preceding it. After all, these agencies had assigned AAA ratings to collaterised debt obligations (CDOs) that collapsed a month later. Yet they were able to get away for years after the crisis, with the argument that credit ratings were just opinions…and opinions can turn out to be wrong. Read more