A Brief Description of Credit Rating Agencies and their Role in the US Subprime Financial Crisis
As pointed out in previous chapters, rating agencies contributed to a large amount to the damaging of this level trust that must now be restored. Therefore, it is only following the logic of these reforms that rating agencies must contribute largely to stabilization measures by adjusting business practices and restoring confidence by fulfilling their intended role. 8 Conclusion The effects of rating agencies’ conduct in the course of the U. S. subprime financial crisis are as grave as the impacts of the crisis itself on the world economy. By defining the intended role or CRAs and thereby determining their purpose in financial markets, this paper sets forth a desired market outcome and puts it in direct contrast with the situation as it exists today. From this comparison, the conclusion can be drawn that credit rating agencies have negligently ignored their intended purpose. By this conduct, CRAs have withdrawn themselves from their responsibility towards all participants of financial markets. In order to overcome the current financial crisis and to prevent future ones, credit rating agencies have to redefine their role and purpose to once again fulfill their function as an independent, valuable contributor towards an improved market outcome. To ensure this necessary development, the accountability gap surrounding the rating industry must be filled by new regulatory reforms on a global scale.