The Regulation Of Credit Rating Failure In America And Tts Enlightment To Our Country

The outbreak of2007Subprime Mortgage Crisis devastates the order of global economy,it also damages our confidence in the credit rating agencies (CRAs). With the continuousdevelopment of the capital market, we need better credit risk management tools to protect andpromote a stable and healthy financial system. To clarify the problems of our credit ratingindustry and find the regulatory approach, this paper will offer a few ideas and suggestions forthe construction of our regulatory regime, from the study of the legislation in America whichis the birthplace of the credit rating industry.This paper is divided into four parts.The first part begins with the development of the credit rating industry in our country. Atfirst, CRAs were linked to financial banks. With their import information value for the market,CRAs develop rapidly in the financial market. In addition, the regulatory rules formulated bythe government departments also play an important role in this progress. However, in China,the credit rating industry doesn’t have a long history, although it has made rapid growth, thereare still many serious problems at present, such as with small-scaled, immature technology,and low market acceptance.The second part examines the development of the credit rating industry. The credit ratingindustry in America booms by taking use of the specific social condition, as well as thesupport of asymmetric information theory. on basis of the social background, as well as thesupport of asymmetric information theory. Another important reason is that the U.S. financialregulatory cite CRA in their financial supervision regime, which greatly enhanced the statusin the financial market.The third part is mainly about the reform of legislation on credit rating agency inAmerica. The credit rating agencies performed poorly in Enron event and the SubprimeMortgage Crisis, which exposes lots of problems in the industry, such as incompleteinformation disclosure system, the lack of competition, imprecise internal control procedures,the obvious conflict of interest and the lack of responsibility and so on. Afterwards, the U.S.government approves two acts, Credit Rating Reform Act and Dodd-Frank Wall StreetReform and Consumer Protection Act, to solve these problems.The fourth part discusses the enlightenment from legislative evolution of the credit rating agency in America. By the research, we can realize, the forms of problems in the credit ratingagency differs in different historical periods. Therefore, to achieve the purpose of promotingthe stability of financial market and protecting the interest of investors, the regulation that wewill make should be compatible with the situation of our country.Of course, China has its own specific national conditions, we cannot establish our creditrating system by copying the pattern of American. Therefore, we should learn from it bydistinguishing its advantages and defects, and explore a suitable and advanced system withChinese characteristics.