Objectives:
After the first wave of the 2007 financial crisis, we can observe now the second wave. The final results of the latest crisis are still unknown. However, it may already be stated that the crisis differs from the previous one in reference to strong criticism concerning credit rating, especially in the voices of politicians and regulators.
At present, credit rating is one of the standards in financial market functioning. It is commonly used as a tool for reducing the investment risk, calculating the spread of debt instruments in the primary and secondary market and assessing the level of bankruptcy risk. Also, the credit rating is present in investment law regulations as a measure of investment safety. All these factors compose to the real importance of credit rating in the modern financial market.
Certainly, credit rating agencies are not infallible. They have made mistakes, examples of which will be stated in the article. But in history, those agencies did not downgrade (or mentioned possibility of such downgrade) the highest credit rating such economically and politically important countries as the United States of America, France or Germany.
In consequence, we can now observe a real battle between:
- private-owned credit rating agencies,
- governments of single countries and the European Union with financial supervisions,
- investors, issuers, analysts and media.
The effect of that relationship which can be perceived even as “war” will definitely influence the new financial order which will appear after the crisis.
But it seems, undoubtedly, that the new formula for credit rating will be implemented worldwide. In effect, probably credit rating will enter a new stage: a tool less used in law regulations and of less influence on the banking sector capital adequacy.
The aim of the elaboration is to draw attention to selected aspects of credit rating, especially from the macroeconomic point of view as additional voice in the current discussion.
Data / Methods
In the article, comparison method, induction method and case study were used.
Conclusion
The article deals with credit rating and its present importance for the financial market. On that basis possible scenarios for credit rating importance in the future will be analyzed.
Nowadays, the credit rating system and credit rating agencies’ behavior and work quality are discussed worldwide. Therefore, the article can be seen as a voice in the discussion about future architecture of financial market and safety system net.