Foreword
Preface
List of Abbreviations
1 Reliance versus Over-reliance
?1.1?Contextual Setting
?1.2?A Holistic Study of Over-reliance
?1.3?Book Structure
2 The 'Good' Aspects of Credit Ratings: A Basis for Reliance
??Introduction
?2.1?The Importance of Credit Ratings in the Financial Markets: The Reliance of the Private Sector
??2.1.1?The Credit Rating Industry: Origins and Development
??2.1.2?Credit Ratings: Categories and Formation Process
??2.1.3?Credit Ratings as Opinions on Creditworthiness
??2.1.4?cra Informational Services
??2.1.5?The cra Monitoring Services: Outlook and Watch-List Procedures
??2.1.6?Users of cra Services
?2.2?The Public Sector's Reliance on Credit Ratings
??2.2.1?cras as Certification Providers
??2.2.2?Clarifying the Certification Function of cras
??2.2.3?Understanding the Regulatory Reliance on Credit Ratings
??2.2.4?Mapping the Regulatory Use of Credit Ratings
??Concluding Remarks
3 Reliance Versus Influence: A Roadmap toward the Risk of Over-Reliance
??Introduction
?3.1?Negative Effects of Rating Changes and the Role of Rating-Based Regulation
??3.1.1?Downgrades, Rating Triggers and Liquidity Problems
??3.1.2?Cliff-Edge Effects and Herd Behaviours
??3.1.3?Systemic Risk and Spill-Over Effects Across Markets
??3.1.4?Rating-Based Regulation and Its Implications: A Critical Review
??Concluding Remarks
4 Over-Reliance on External Credit Ratings: In Search of a Meaning
??Introduction
?4.1?Understanding Over-Reliance on Credit Ratings
??4.1.1?Detecting the Phenomenon: Over-Reliance in the US Pre-crisis Regulatory Debate on CRAs
??4.1.2?Over-Reliance in the eu Pre-crisis Regulatory Debate on cras
??4.1.3?The Sources of Over-Reliance: Rating-Based Regulation versus the Structured Finance Sector
??4.1.4?Closing the Gap: Defining Over-Reliance on External Credit Ratings
??Concluding Remarks
5 Regulatory Approaches at the National, International and Regional Levels to Address Over-Reliance on Credit Ratings
??Introduction
?5.1?The Evolution of the Regulatory Debate
??5.1.1?US Level: Section 939A of the Dodd-Frank Act: Reliance versus Over-Reliance
??5.1.2?The fsb Principles for Reducing Reliance on Credit Ratings: Searching for Over-Reliance
??5.1.3?The European cra Regulation iii: Confirming Over-Reliance
??Concluding Remarks
6 Regulatory Approaches against Over-Reliance and Their Implementation
??Introduction
?6.1?In Search of Effectiveness
??6.1.1?Normative Approaches in Focus
??6.1.2?Implementation Process in Focus
?6.2?The Status of the us Reforms under Section 939A of the Dodd-Frank Act
??6.2.1?The Early Debate on Section 939A
??6.2.2?us Federal Agencies Reform Processes
??6.2.3?The us Reforms: A Critical Review in Relation to the Risk of Over-Reliance
?6.3? The Status of the eu Reforms under the cra iii Regulation
??6.3.1?The Work of the esas
??6.3.2?The eba's, Mandate
??6.3.3?The esma's Mandate
??6.3.4?Perspectives on the eu Approach in the Future
?6.4?The eu Approach: A Critical Review
?6.5?A More Independent Credit Risk Analysis: From Theory to Practice
??6.5.1?The Status of Implementation
??6.5.2?The Second Level of the Approach: A Critical Review
??Concluding Remarks
7 Reviewing the Debate on Over-Reliance and Approaches against it
??Introduction
?7.1?Credit Rating References and the 'Official Seal of Approval': What Has been Missed?
??7.1.1?cra Market Failures and Regulatory Interventions
??7.1.2?Evidence of Over-Reliance in the Structured Finance Sector
??7.1.3?Evidence of Over-Reliance on Credit Rating Legislative References
?7.2?Anticipating the Post-Crisis Debate on Over-Reliance
??7.2.1?cra Message to the Regulators
??7.2.2?cra Message to the Users of Credit Ratings
??Concluding Remarks
8 Conclusions
?8.1?Taking Stock of the Situation
??8.2?Developing an Assertion into Certainty: Providing Evidence of Over-reliance
??8.3?Encouraging More Dialogue and Coordination at All Levels
??8.4?Ensuring More of a Level-Playing Field among Credit Risk Assessment Tools
??8.5?Looking Ahead
??Concluding Remarks
Bibliography
Index
