Credit rating agencies play a critical role in capital markets,
guiding the asset allocation of institutional investors as private
capital moves freely around the world in search of the best
trade-off between risk and return. However, they have also been
strongly criticised for failing to spot the Asian crisis in the
early 1990s, the Enron, WorldCom and Parmalat collapses in the
early 2000s and finally for their ratings of subprime-related
structured finance instruments and their role in the current
financial crisis.
This book is a guide to ratings, the ratings industry and the
mechanics and economics of obtaining a rating. It sheds light on
the role that the agencies play in the international financial
markets. It avoids the sensationalist approach often associated
with studies of rating scandals and the financial crisis, and
instead provides an objective and critical analysis of the business
of ratings. The book will be of practical use to any individual who
has to deal with ratings and the ratings industry in their
day-to-day job.
Reviews
""Rating agencies fulfil an important role in the capital
markets, but given their power, they are frequently the object of
criticism. Some of it is justified but most of it portrays a lack
of understanding of their business. In their book The Rating
Agencies and their Credit Ratings, Herwig and Patricia Langohr
provide an excellent economic background to the role of rating
agencies and also a thorough understanding of their business and
the problems they face. I recommend this book to all those who have
an interest in this somewhat arcane but extremely important
area."
"-Robin Monro-Davies, Former CEO, Fitch Ratings.
""At a time of unprecedented public and political scrutiny of the
effectiveness and indeed the basic business model of the Credit
Rating industry, and heightened concerns regarding the transparency
and accountability of the leading agencies, this book provides a
commendably comprehensive overview, and should provide invaluable
assistance in the ongoing debate."
"-Rupert Atkinson, Managing Director, Head of Credit Advisory
Group, Morgan Stanley and member of the SIFMA Rating Agency Task
Force
""The Langohrs have provided useful information in a field where
one frequently finds only opinions or misconceptions. They supply a
firm base from which to understand changes now underway. A
well-read copy of this monograph should be close to the desk of
every investor, issuer and financial regulator, legislator or
commentator.""
-John Grout, Policy and Technical Director, The Association of
Corporate Treasurers
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