Regulating Credit Rating Agencies in the European Union: Lessons from Behavioural Science
Year: 2012
Type: preprint
Abstract: Since the beginning of the global financial and economic crisis, the search for its causes has been in full flight on both sides of the Atlantic. Inter alia, fundamental failures in the evaluation of risk and the role that Credit Rating Agencies (CRAs) play in the assessment of credit risk are discussed. More specifically, the question is raised as to what the role of CRAs is in the financial markets, why this role may be problematic and how the main weaknesses of the present system can be addressed in the European Union (EU) and elsewhere. This contribution does not aim to provide a discussion of all theoretical aspects that might be involved in an economic analysis of CRAs, but to better understand the main behavioural economics and normative arguments that may be related. Thereby, the current EU regulatory framework on CRAs and credit ratings will be scrutinized. The basic hypothesis of this contribution is that the current and proposed future EU regulatory framework does not fully succeed in effectively tackling failures in the CRA market, because insights from behavioural economics are widely neglected.
Source: SSRN Electronic Journal
Authors: Fabian Amtenbrink, Klaus Heine
Institution: Erasmus University Rotterdam
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1877798933