The role and responsibility of credit rating agencies in promoting soundness and integrity

Abstract

Purpose – The purpose of this paper is to investigate the role and responsibility of credit rating agencies in promoting soundness and integrity, especially in the course of their business activities. Design/methodology/approach – The paper describes, and uses, the framework for the activities of credit rating agencies introduced by the International Organization of Securities Commissions (IOSCO), in order to give effect to this investigation. Findings – Credit rating agencies have implemented the provisions of the Code of Conduct Fundamentals for Credit Rating Agencies of the IOSCO on the quality and integrity of the rating process, to the extent of the resources available to them. Research limitations/implications – The main source of data is the information collected by the IOSCO from nine credit rating agencies, including the main three, on the quality and integrity of their rating processes. The absence of triangulation of research methods limits the robustness of the findings. Originality/value – The paper addresses a specific aspect of the credit ratings story since the financial crisis on which there is currently little in the literature. It also focuses upon the actions of credit rating agencies, rather than on how these organisations are, or should be, regulated.