Credit Rating Agencies Self-regulation, Statutory Regulation and Cas
The book examines the role of credit rating agencies (CRAs) in the subprime mortgage crisis. The CRAs are blamed for awarding risky securities ‘3-A’ investment grade status and then failing to downgrade them quickly enough when circumstances changed, whic
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Credit Rating Agencies Self-regulation, Statutory Regulation and Case Law Regulation in the United States and European Union
Credit Rating Agencies
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Mohammed Hemraj
Credit Rating Agencies Self-regulation, Statutory Regulation and Case Law Regulation in the United States and European Union
Mohammed Hemraj Birmingham United Kingdom
ISBN 978-3-319-17926-1 ISBN 978-3-319-17927-8 DOI 10.1007/978-3-319-17927-8
(eBook)
Library of Congress Control Number: 2015937938 Springer Cham Heidelberg New York Dordrecht London © Springer International Publishing Switzerland 2015 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper Springer International Publishing AG Switzerland is part of Springer Science+Business Media (www.springer.com)
To my late parents, my wife Zakia and my children Amirali, Sukaina and Faiza.
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Foreword
The recent world financial crisis and the consequential changes in banking and financial services regulation have inevitably drawn a great deal of attention to the causes and processes of the crisis and its aftermath. One key element in the whole saga was the role played by credit rating agencies, particularly in rating companies set up to handle long-term residential mortgage debt. Structures such as SPVs and SIVs were utilised to issue the bonds and thus restructure long-term bank lending into shorter-term bond issues. As a result, a large quantity of long-term debt was repackaged in the form of highly credit-rated grade corporate bonds. While this certainly involved excessive leveraging of the mortgage lending market and extensive exposure by certain banks to the international bond markets, the precise extent and role that securitisation played in the banking crisis is widely debated as is the fact that the ratings were virtually all issued by three firms. This text engages in a much-needed analysis of both this process, focusing on the role of the rating agencies, and the process that it i
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