How to Reform the Credit-Rating Process to Support a Sustainable Revival of Private-Label Securitization ¤

IF 0.9 Q3 BUSINESS, FINANCE
R. Herring, E. Kane
{"title":"How to Reform the Credit-Rating Process to Support a Sustainable Revival of Private-Label Securitization ¤","authors":"R. Herring, E. Kane","doi":"10.1142/S2010139212500024","DOIUrl":null,"url":null,"abstract":"US product-liability laws unwisely treat credit-rating organizations (CROs) as if they produce opinions rather than empirically-based economic research. In principle, trained professionals gather time-varying information (\"financial news\") and analyze it statistically to reduce it to a single dimension, allegedly for the benefit of investors, which, in turn, enables issuers to finance themselves at lower cost. In practice, the issuer-pays business model currently used for funding the production and distribution of ratings information creates an incentive to favor high-volume issuers by over-rating private-label securitizations. While the Dodd–Frank Act intensifies SEC oversight of CRO activity, the SEC has a history of being captured by regulatory clients. We argue that the fundamental solution is to create accountability in the ratings process so that private label securitizations can play a constructive role in the provision of credit and we go on to offer some conjectures about how this could be done.","PeriodicalId":45339,"journal":{"name":"Quarterly Journal of Finance","volume":null,"pages":null},"PeriodicalIF":0.9000,"publicationDate":"2012-07-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Quarterly Journal of Finance","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.1142/S2010139212500024","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0

Abstract

US product-liability laws unwisely treat credit-rating organizations (CROs) as if they produce opinions rather than empirically-based economic research. In principle, trained professionals gather time-varying information ("financial news") and analyze it statistically to reduce it to a single dimension, allegedly for the benefit of investors, which, in turn, enables issuers to finance themselves at lower cost. In practice, the issuer-pays business model currently used for funding the production and distribution of ratings information creates an incentive to favor high-volume issuers by over-rating private-label securitizations. While the Dodd–Frank Act intensifies SEC oversight of CRO activity, the SEC has a history of being captured by regulatory clients. We argue that the fundamental solution is to create accountability in the ratings process so that private label securitizations can play a constructive role in the provision of credit and we go on to offer some conjectures about how this could be done.
如何改革信用评级程序以支持自有品牌证券化的可持续复兴
美国产品责任法不明智地将信用评级机构(cro)视为发表意见,而不是基于经验的经济研究。原则上,训练有素的专业人员收集时变信息(“金融新闻”),并对其进行统计分析,将其减少到单一维度,据称是为了投资者的利益,这反过来又使发行人能够以更低的成本为自己融资。在实践中,目前用于为评级信息的制作和分发提供资金的“发行者付费”商业模式,会通过对自有品牌证券的过高评级来鼓励大量发行者。虽然《多德-弗兰克法案》(Dodd-Frank Act)加强了SEC对CRO活动的监督,但SEC向来有被监管机构客户俘获的历史。我们认为,根本的解决方案是在评级过程中建立问责制,使自有品牌证券化在提供信贷方面发挥建设性作用,我们继续就如何做到这一点提出一些猜想。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 求助全文
来源期刊
Quarterly Journal of Finance
Quarterly Journal of Finance BUSINESS, FINANCE-
CiteScore
1.10
自引率
0.00%
发文量
0
期刊介绍: The Quarterly Journal of Finance publishes high-quality papers in all areas of finance, including corporate finance, asset pricing, financial econometrics, international finance, macro-finance, behavioral finance, banking and financial intermediation, capital markets, risk management and insurance, derivatives, quantitative finance, corporate governance and compensation, investments and entrepreneurial finance.
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
确定
请完成安全验证×
copy
已复制链接
快去分享给好友吧!
我知道了
右上角分享
点击右上角分享
0
联系我们:info@booksci.cn Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。 Copyright © 2023 布克学术 All rights reserved.
京ICP备2023020795号-1
ghs 京公网安备 11010802042870号
Book学术文献互助
Book学术文献互助群
群 号:481959085
Book学术官方微信