Legal Review On The Credibility Of Credit Rating

Credit Rating Agency (CRA) was born in American railroad bond boom in the early 20th century. Rating agencies played an indispensable role on reducing information asymmetry, revealing credit risk, increasing market efficiency, and supervising the market professionally. In recent years, regional economic frequent fluctuations, large companies and accounting firms including the fraud cases and the subprime crisis made the credibility of credit ratings be strongly questioned. Credit rating agencies failed to issue a caution warning, demotion in volatility after a substantial amendment further amplified market risk. Reflection the response actions of rating agencies, they should bear a large degree on the crisis.While the rating results are objective limitations inaccurate, the problems exposed by the crisis are something that needed change in the credit rating industry. Barriers to market access after the accumulation of reputation caused the small number of rating agencies hold a big voice on the capital market. When rating agencies had a choose between the profit and the fair rating, moral hazard appeared. The legal status of rating agencies was too lenient to being in the development of modern capital markets. Regulation for credit rating industry needed to rebuild. All these factors restricted the play of credibility rating. Chinese rating industry faces the situation that lagging credit infrastructure, corporate bond constraint market demand, disordered rating competition order, lack of relevant legal systems and regulatory status were not uniform. Developed credit rating industry provides a good reference for our country.In this paper, we will discus these problems for the entry point the mechanism of the credit rating system, to the perspective of legal reform, using logical analysis and the comparative method. The problem that access to rating industry, the rating of costs of the model and the choice of mechanism for conflict and interest, the legal status of rating agencies, and accountability mechanisms to rebuild and regulatory issues of ratings industry will be explored in depth. I will draw on the latest reform of the international credit rating industry, combined with the development of China's domestic credit rating industry present situation,to give some legal and regulatory reform proposals for our development.Besides the introduction and epilogue, this paper is divided into five parts.The first chapter introduces the basic situation of the credit rating system, focusing on credit rating combed the theoretical basis and mechanism, as discussed below lay a good foundation.The second chapter discussed market access issues of credit rating agencies, analysis of the difficulties brought about regulatory license, as well as the United States and Europe reform for the access of rating agencies, combined with our credit rating industry situation, I will give recommendations.The third chapter focuses on the prevention of conflict of interest of credit rating issues, including rating and rating services fees paid model specification problems, but also significant in our country, given a sound proposal.This chapter analyzes the legal status of credit rating agencies issue, and held responsibility for the plight of bad credit rating is what the international rating industry reform in the rating industry, the existing legal framework in place in the Enlightenment.The fifth chapter we compared monitor mode of the United States and Europe through credit rating agencies, and we also find out our path to change rating industry.