International Credit Rating Industry’s Conflicts Of Interest And Regulation

Under the sub-prime crisis and the European debt crisis, the paper discusses thereason for the failure of the credit rating and the three major U.S. credit ratingagencies dominate in the global credit rating industry. This paper demonstrates thedefects of credit rating industry and in exceptional economic environment, thesedeficiencies led to the ratings failure. On this basis, this paper presents suggestions onhow to remedy these deficiencies.This paper is divided into four chapters:Chapter1： Introduction. This chapter introduces the research background(Subprime crisis), significance, summary review of foreign and domestic research andthis paper’s research ideas and methods.This chapter describes not only the important role of credit rating agencies at themacro level and the micro level, but also introduces the role of rating agencies in thesubprime crisis and exposes the conflict of interest in the credit rating industry. Inthis context, this chapter also pointed out that the paper using evolutionary gamemodel to analyze the credit rating industry’s conflicts of interest is significance. Inaddition, this paper uses the monopoly of political economy explaining the threemajor U.S. credit rating agencies how to impact other countries’ rating industry andthis will help to deepen the understanding of the credit rating industry’s conflict ofinterest from the theoretical.The second chapter describes the development of the international credit ratingindustry. This chapter first describes the development of the credit rating industryduring United States, Japan, Europe and emerging countries. As can be seen from thedevelopment of the rating industry during these countries, the U.S. rating agencieshave an absolute monopoly on the international financial markets. Secondly, thischapter describes not only the U.S. rating agencies’ role in the financial crisis, butalso demonstrates the U.S. rating agencies’ lack of regulation leading to the crisis.The third chapter analyzes the conflict of interest of credit rating industry. Thischapter first describes what is a conflict of interest credit rating industry and thereasons for the conflict of interest arising. Secondly, this chapter uses evolutionarygame model to analyze the conflict of interest. The fourth chapter points out the three reform directions of international creditrating industry: strengthening supervision of credit rating industry, changing incharging mode and allowing the public rating agencies to intervene, developingnational credit rating agencies and dual rating system.