Kreditvurderingsbureauer og interessekonflikter: En juridisk og retsøkonomisk analyse af reguleringsindsatsen mod interessekonflikter i relation til kreditvurderingsbureauer inden for Den Europæiske Union

Joakim Brunbjerg Ortmann & Noah Krohn Kempinski

Student thesis: Master thesis


Conflicts of interest between credit rating agencies and the investors, to whom the agencies distribute information, played an important role in the financial crisis. As a result hereof, the regulatory framework surrounding the agencies has been substantially modified in recent years.
This thesis aims at analyzing both the scope of the current European legislation intended to prevent conflicts of interest, and the efficiency of such from a law and economics perspective. In doing so, the thesis seeks to contribute to the ongoing debate regarding the expediency of the European regulatory framework by undertaking a thorough interdisciplinary approach.
The thesis finds that while the regulation efficiently minimizes the risk of conflicts of interest arising from a number of areas, the most significant risk factor (the remuneration model) has been left unregulated. The issuers of the financial products rated by the credit rating agencies have an economic interest in receiving the best possible ratings. Hence, the combination of the issuer-pays model as the dominant remuneration model in the market, the ability of the issuers to engage in rating shopping and the lack of direct regulation in this respect, represent a significant risk of creating incentives for the issuing of inflated credit ratings. Although no current alternatives to the issuer-pays model are found to sufficiently justify regulation in favor of such alternatives, further effort should be invested in developing a viable solution to the root of the problem instead of focusing solely on the symptoms. Until such an alternative is found, consideration should be given to the possibility of limiting the risk of rating shopping by eliminating the possibility of issuing preliminary credit ratings that does not contain a disclosure requirement. In doing so the risk of rating shopping will decrease.
The thesis further finds that the risk incurred by the agencies of losing reputation as a result of issuing inflated ratings cannot always be expected to deter agencies from issuing incorrect ratings. The same conclusion is reached in regards to the risk of sanctions or civil liability under the current regulatory framework. Therefore, the current level of fines should be reassessed while the possibility of holding an agency liable should be increased and harmonized across the European Union.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2017
Number of pages117
SupervisorsCaspar Rose