Ebook: Ratings, Rating Agencies and the Global Financial System

Ratings, Rating Agencies and the Global Financial System brings together the research of economists at New York University and the University of Maryland, along with those from the private sector, government bodies, and other universities. The first section of the volume focuses on the historical origins of the credit rating business and its present day industrial organization structure. The second section presents several empirical studies crafted largely around individual firm-level or bank-level data. These studies examine (a) the relationship between ratings and the default and recovery experience of corporate borrowers, (b) the comparability of credit ratings made by domestic and foreign rating agencies, and (c) the usefulness of financial market indicators for rating banks, among other topics. In the third section, the record of sovereign credit ratings in predicting financial crises and the reaction of financial markets to changes in credit ratings is examined. The final section of the volume emphasizes policy issues now facing regulators and credit rating agencies.

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Ratings, Rating Agencies and the Global Financial System brings together the research of economists at New York University and the University of Maryland, along with those from the private sector, government bodies, and other universities. The first section of the volume focuses on the historical origins of the credit rating business and its present day industrial organization structure. The second section presents several empirical studies crafted largely around individual firm-level or bank-level data. These studies examine (a) the relationship between ratings and the default and recovery experience of corporate borrowers, (b) the comparability of credit ratings made by domestic and foreign rating agencies, and (c) the usefulness of financial market indicators for rating banks, among other topics. In the third section, the record of sovereign credit ratings in predicting financial crises and the reaction of financial markets to changes in credit ratings is examined. The final section of the volume emphasizes policy issues now facing regulators and credit rating agencies.

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Ratings, Rating Agencies and the Global Financial System brings together the research of economists at New York University and the University of Maryland, along with those from the private sector, government bodies, and other universities. The first section of the volume focuses on the historical origins of the credit rating business and its present day industrial organization structure. The second section presents several empirical studies crafted largely around individual firm-level or bank-level data. These studies examine (a) the relationship between ratings and the default and recovery experience of corporate borrowers, (b) the comparability of credit ratings made by domestic and foreign rating agencies, and (c) the usefulness of financial market indicators for rating banks, among other topics. In the third section, the record of sovereign credit ratings in predicting financial crises and the reaction of financial markets to changes in credit ratings is examined. The final section of the volume emphasizes policy issues now facing regulators and credit rating agencies.
Content:
Front Matter....Pages i-xi
Introduction: Ratings, Rating Agencies and the Global Financial System: Summary and Policy Implications....Pages 1-15
Front Matter....Pages 17-17
An Historical Primer on the Business of Credit Rating....Pages 19-40
The Credit Rating Industry: An Industrial Organization Analysis....Pages 41-63
The Paradox of Credit Ratings....Pages 65-84
Discussion....Pages 85-88
Discussion....Pages 89-95
Front Matter....Pages 97-97
The Role of Credit Ratings in Bank Capital....Pages 99-116
A Guide to Choosing Absolute Bank Capital Requirements....Pages 117-138
Credit Ratings and the Japanese Corporate Bond Market....Pages 139-158
How Good is the Market at Assessing Bank Fragility? A Horse Race Between Different Indicators....Pages 159-176
Rating Banks in Emerging Markets: What Credit Rating Agencies Should Learn from Financial Indicators....Pages 177-201
Discussion: Altman and Saunders on Relative Credit Risk & Carey on Absolute Credit Risk....Pages 202-212
Discussion....Pages 213-220
Discussion....Pages 221-224
Front Matter....Pages 225-225
Rating Agencies and Financial Markets....Pages 227-249
Sovereign Credit Ratings Before and After Financial Crises....Pages 251-268
Equity Risk Premiums....Pages 269-285
Front Matter....Pages 287-287
Rating Agencies: Is There an Agency Issue?....Pages 289-318
Do Banks Provision for Bad Loans in Good Times? Empirical Evidence and Policy Implications....Pages 319-342
Policy Issues Facing Rating Agencies....Pages 343-344
Back Matter....Pages 369-379
Credit Risk and Financial Instability....Pages 345-367

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Ratings, Rating Agencies and the Global Financial System brings together the research of economists at New York University and the University of Maryland, along with those from the private sector, government bodies, and other universities. The first section of the volume focuses on the historical origins of the credit rating business and its present day industrial organization structure. The second section presents several empirical studies crafted largely around individual firm-level or bank-level data. These studies examine (a) the relationship between ratings and the default and recovery experience of corporate borrowers, (b) the comparability of credit ratings made by domestic and foreign rating agencies, and (c) the usefulness of financial market indicators for rating banks, among other topics. In the third section, the record of sovereign credit ratings in predicting financial crises and the reaction of financial markets to changes in credit ratings is examined. The final section of the volume emphasizes policy issues now facing regulators and credit rating agencies.
Content:
Front Matter....Pages i-xi
Introduction: Ratings, Rating Agencies and the Global Financial System: Summary and Policy Implications....Pages 1-15
Front Matter....Pages 17-17
An Historical Primer on the Business of Credit Rating....Pages 19-40
The Credit Rating Industry: An Industrial Organization Analysis....Pages 41-63
The Paradox of Credit Ratings....Pages 65-84
Discussion....Pages 85-88
Discussion....Pages 89-95
Front Matter....Pages 97-97
The Role of Credit Ratings in Bank Capital....Pages 99-116
A Guide to Choosing Absolute Bank Capital Requirements....Pages 117-138
Credit Ratings and the Japanese Corporate Bond Market....Pages 139-158
How Good is the Market at Assessing Bank Fragility? A Horse Race Between Different Indicators....Pages 159-176
Rating Banks in Emerging Markets: What Credit Rating Agencies Should Learn from Financial Indicators....Pages 177-201
Discussion: Altman and Saunders on Relative Credit Risk & Carey on Absolute Credit Risk....Pages 202-212
Discussion....Pages 213-220
Discussion....Pages 221-224
Front Matter....Pages 225-225
Rating Agencies and Financial Markets....Pages 227-249
Sovereign Credit Ratings Before and After Financial Crises....Pages 251-268
Equity Risk Premiums....Pages 269-285
Front Matter....Pages 287-287
Rating Agencies: Is There an Agency Issue?....Pages 289-318
Do Banks Provision for Bad Loans in Good Times? Empirical Evidence and Policy Implications....Pages 319-342
Policy Issues Facing Rating Agencies....Pages 343-344
Back Matter....Pages 369-379
Credit Risk and Financial Instability....Pages 345-367
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