The book starts with the weaknesses of the agencies in relation to asset-backed securities’ ratings and concludes with the policy discussions around the ratings of EU sovereign bonds, prompted by the Euro debt crisis. This crisis has stirred up a wider debate on other policy issues. The chapter discusses the business models proposed as alternatives to the issuer-pays model to address conflicts of interest and enhance competition, including the creation of a public European rating agency. It also presents the pros and cons of increasing civil liability for rating agencies. The impact of sovereign downgrades on financial stability is also examined, together with the European Commission’s proposals. Finally, it concludes with the authors’ support for an enhanced regulatory and oversight coordination at global level through IOSCO, a reduction of the existing over-reliance on ratings, and a concentration of resources on the enforcement of the current regulatory framework.
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