Credit Rating Agencies

This book offers an insightful look into the credit rating industry, examining its functions, evolution, and the critical role it played in the 2008 financial crisis.

In Credit Rating Agencies, Giulia Mennillo provides a critical introduction to the intricate world of the credit rating industry. This exploration covers how credit rating agencies (CRAs) operate, their historical evolution, and the significant role they played during the financial crisis of 2008. By assessing the creditworthiness of various debt issuers, CRAs have become influential players in financial markets, offering opinions on the likelihood of repayment of debts. However, these ratings are not investment recommendations, which often leads to misunderstandings about their authority and impact.

The financial crisis brought CRAs under scrutiny as the highly rated financial products they endorsed were revealed to be toxic assets. This situation resulted in a backlash against these agencies, which were criticized for their overly optimistic ratings and their involvement in the creation of such risky financial instruments. Mennillo examines how this crisis highlighted the vulnerabilities and responsibilities of CRAs in the global financial system.

Credit Rating Agencies delves into the broader implications of CRAs, revealing their social and political significance that extends beyond finance. Mennillo argues that these agencies have a profound impact on various sectors, including transport, infrastructure, education, and health. As the influence of financialization grows, understanding the role of CRAs becomes essential for grasping the complexities of modern economic systems.