Credit Rating Agencies On The Civil Liability To The Bond Issuers

The credit rating business, which was originated in the U.S. stock market, has become an important tool to measure the credit of different bond issuers. The significance of credit rating does not only reflect on large number of public investors taking it to decide where to invest their money, but also on bond issuers to reduce their financing costs. Despite the current credit rating report is one of the measures in many countries to exert their financial regulations, the disappointing performance in the financial crisis of the credit rating agencies makes those governments recognize the problems. Improving regulatory system, though, can urge a more cautious business of the credit rating agencies, if the rating agencies escape the responsibilities for their actions, it will be resulted in the weakening of the impact of the regulation. Based on the above-mentioned reasons, I choose the perspective of civil liability to target research.As Professor Sheng Shiping stated in his"The Legal Liability in U.S. Securities Rating Agencies," the credit rating agencies may likely take the liability due to its credit rating report to the bond issuer or to the third party. The credit rating agencies are increasingly required to take more liabilities to the third party after sub-prime mortgage crisis, but given the important role the rating report playing on the bond issuers, once the rating report inaccurate, the bond issuers may face the risk of losing opportunities and fail to carry their financing plan on.Therefore, I choose the civil responsibilities of the credit rating agencies to bond issuers. Following the path of question-proposing, idea-analyzing and problem-solving, this thesis is divided into three main parts, that is, introduction, body and conclusion, in which the body consists of four chapters.The introduction part explains the background and source of the problem, clarifies domestic research in this field at the stage and demonstrates the overall framework. Besides, research methods are involved.The first chapter begins with a brief description of the concept of credit rating business and its main business. Then, this chapter further discusses the characteristics of credit rating agencies. In the final part of this chapter, the theory of"The Market for Lemons"will be introduced to analyze what functions the credit rating agencies play in the market.In the second chapter, it defines the legal relationship between the credit rating agencies and bond issuers. The relationship between the two is identified as contract legal relationship. Then, it also discusses current theories about the types of the contracts between the two in different views.The third chapter further analyzes the traits of liability between the credit rating agencies and bond issuers. Despite the existing contractual relationship between them, the judicial practices in foreign countries have imposed tort liability on the credit rating agencies. Therefore, this chapter first introduces the current provisions on the liability of the credit rating agencies, further; it sorts out the characteristics of the liabilities of credit rating agencies in the judicial practices. On this basis, the possibility that credit rating agencies take accordingly liabilities has been proposed in this chapter.After the discussion of the liability of credit agencies, the fourth chapter puts the focuses on two ways: one is to discuss the principle of culpability of the credit rating agencies, and the criteria for determining their fault. The other one is how to calculate the loss of bond issuersFinally, the conclusion will summarize the main ideas of this thesis and draw out the research findings.