The Post-crisis Era, The Credit Rating Agencies Regulation Legal System Research

Credit rating agencies (CRAs) play a significant role in today’s financial market, with the complication of bonds and other financial products, investors more and more rely on credit rating agencies to use those simply rating symbols to give risk tips for their investment behaviors. It can be said that the influence of CRA in the market is not smaller than those large financial institutions, but there are few regulatory regulations on them. This phenomenon made their behaviors in subprime mortgage crisis and the debt crisis in Europe very disappointing. CRA did not give their risk tips in advance, on the contrary, due to the high rating grades, they boosted the spread of the crisis. In this context, the Western countries, especially the United States, realize that CRAs need supervised as the same as investment banks or hedge funds do.At present, it is not obvious that people rely on CRAs in China and the credit rating industry is in its infancy, because the Chinese bonds market is undeveloped. So, our system on the supervision of CRAs is very limited. Through analysis of the behaviors of CRAs in those two crises in this thesis, the author wants to find the crux of CRA supervision system. Then, with the study and analysis of the western countries’ regulatory measures, the thesis probes into the improvement of CRA supervision system in our country from three aspects:market access, information disclosure and conflicts of interest. The thesis consists of five parts:The first part is the theoretical support of this thesis. This part is to introduce the definitions of credit rating and CRA, and the market functions of CRA. It also elaborates the inside theoretical basis of the generation of CRA. The second part is to compare the histories and general situations of CRA supervision in U.S., EU and Japan, and analyses the characteristics of their developments of rating agencies and CRA supervision. In this part, the author gets a conclusion that the U.S. is in the lead of other countries in the rating industry and supervisions of CRA. The third part is to analyze the behaviors of CRA in both in subprime mortgage crisis and the debt crisis in Europe respectively. And the author finds that there are three common phenomenons in CRAs’ behaviors:lack of risk tips, free to change the rating results and outdated rating data. This part lays the foundation for the later to find loopholes in the supervision of CRA. In the fourth part, the author finds three problems of regulation of CRA behind their behaviors:less competitive market, ineffective prevention of conflicts of interest and lax information disclosure, then analysis the U.S. supervision measures towards these three problems. This part also includes some new proposals of CRA supervision. The fifth part is to introduce the present situation and problems of the development of CRA and its supervision, and then give proposals to the supervision of CRA in our country in reference to relevant measures in the United States.