The Asymmetric Interdependence of Private Rating Agencies and Public Financial Regulation The Global Systematic Rebalancing

During the last three decades before the 2007-2010 global financial crisis, credit ratings have been increasingly used by national and international public bodies for regulatory purposes. The recent crises not only demonstrated rating agencies’ deep implication on financial product line but also their wide influence on worldwide audience who base their investment or regulatory decisions on credit ratings. This dissertation describes the ascent of ratings-dependent regulation under the transformation of global macro-institutional contexts. When credit ratings are used in financial regulation, transnationally operating credit rating agencies set a private standard of creditworthiness which is made binding by public authority. This public enforcement of private standard constitutes the principal-agent delegation of regulatory authority and governance competence from public financial regulators to private information intermediaries. After conceptualising the regulatory use of credit ratings in a theoretical approach, this dissertation discuss the accountability lap of this private-public principal-agent relationship and the consequence of regulatory overreliance on private rating agencies. Lastly, this dissertation tries to propose some substitutes and legal solutions to diminish this asymmetric private-public interdependence.