The Study On The Legal Issues Of Civil Liability Of Credit Rating Agencies

Since the first credit rating agency(“CRA”)was established in 1841,it has been more than one hundred year for the development of the credit rating industry.The CRA plays an important role in decreasing the information asymmetry,revealing the credit risks of the financial market,improving the efficiency and providing criteria for the regulation of the financial market.However,the credit rating is also a double-edged sword: the improper or inaccurate credit rating not only fails to reflect the real credit conditions of the rated objects,but also heavily damages the whole capital market.The financial crisis in 2007 exposed the CRAs to the criticisms of the public.Due to the inflate credit ratings of the structured financial products concealing the systematic risks behind the market of the structured financial markets,the financial crisis was triggered by the wrongful conducts of the CRAs.After the crisis,the international community such as the US and the EU,immediately carried out the reforms on the regulation of the credit rating industry.The common views of enhancing the supervisions and regulations of the credit rating industry had been established.The Chinese government also started to pay more attentions on the regulations of the credit rating industry and had did a lot of researches on the demand and supply of the credit rating market,the methods of the credit ratings,the international status of the CRAs and the promotion of the credit rating industry.Traditionally,the studies on the supervisions and regulations of the CRAs generally focus on the subjects such as decreasing the conflicts of interests,reducing the regulatory reliance,improving the rating methods,enhancing the disclosure of information,increasing the transparency of the process of the credit ratings.The concerns on the civil liabilities of the CRAs were relatively limited.The legislation of most countries lacked the provisions and rules on the civil liabilities of the CRAs due to the reliance on the self-regulations of the credit rating market based on the reputational capital theory before the financial crisis in 2007.After the crisis,the exemption of civil liability of the CRAs aroused public outrages and disputes on the original regulatory systems.The regulators and policy makers tended to promote the reforms on the civil liability regime of the CRAs.However,the reasonableness and effectiveness of such efforts were questioned and debated by the scholars,which needs to be further investigated and studied.Comparing to the foreign theoretical researches and legislation practice,the studies and legislations on the CRAs in China seems to develop at a slow pace.Up to now,the stipulations and provisions on the legal liabilities of the CRAs are quite few,and most of which concentrate on the administrative liabilities.The rules of the civil liability of the CRAs can hardly be found.The issues of the CRAs' civil liabilities still lack of concerns of the academic community.For this reason,identifying the civil liabilities of the CRAs,improving the related civil law system should be considered to be of great practical significance and high research value for the regulations of the CRAs and the financial conducts,as well as the protections for the interests of various market participants,especially the investors in China.This paper,based on the national conditions and current legal systems of China and combining with the comparison research on the extraterritorial legislation,case law and other regimes of the civil liabilities of the CRAs,aims to research on the civil liability regime of the CRAs in China to further support the future related legislation and judicial practice.