Credit rating agencies: are they credible?

This paper examines the ongoing reputational crisis of credit rating agencies (CRAs) and asks if the CRAs are playing a credible role in financial markets. The current crisis supports the proposition of scepticism on the credibility of CRAs which did not properly disclose risk and thus contributed to pushing the global financial system to the verge of collapse. There may be a need to restrict the role of CRAs in rating sovereign debt and for increased regulation of CRAs. Credit rating agencies need to be held accountable for their ratings and provide transparency for their methodology. There needs to be more competition for Standard & Poor's, Moody's and Fitch which form an oligopolistic market structure.