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Law in Context

Abstract from Volume 30 (2014) Banking and Finance: Perspectives on Law and Regulation

The European Regulation of Credit Rating Agencies

Nina Dietz Legind gained her PhD in Law from the University of Southern Denmark writing a Danish dissertation on Private Surety for Banking Loans. She has been the Head of the Law Department and Professor in Banking and Credit Law from 2009 and a member of various committees and boards.

Camilla Hørby Jensen gained her PhD in Law from the University of Southern Denmark writing a Danish dissertation on Estoppel. She has been Head of Studies from 2013 and Associate Professor in Banking and Credit Law from 2010.

Regulation of credit rating agencies was an important regulatory issue that arose out of the global financial crisis. Credit rating agencies perform a significant intermediary role between various players in the financial market, and as such, the financial system crucially depends on them. Hence, regulatory scrutiny of these institutions is vital. Until 2009, credit rating agencies were largely unregulated in the European Union, but in September of that year the EU introduced comprehensive regulation of credit rating agencies when Regulation (EC) No 1060/2009 was passed. This article discusses the regulation of credit rating agencies in Europe and in particular highlights the significant amendments made to that regulation in 2013. An essential question addressed by this article is whether the present European response to the regulation of credit rating agencies is the right approach to the current situation. The article argues that the EU’s approach to regulation of credit rating agencies goes some way towards addressing a number of the key issues concerning credit rating agencies highlighted by the crisis, although it also has some shortcomings. Finally, the article observes that while credit rating agencies were prominent as one of the immediate causes of the crisis, clearly regulation of credit rating agencies by itself would not have prevented the crisis, nor can such regulation prevent a future financial crisis.

(2014) Vol 30 Law in Context p114

 

   
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