The original idea behind credit rating agencies was to provide evaluations of creditworthiness to help investors gauge the credit risk of investment opportunities. Since the 19th century, financial market processes have led to the continuously increasing importance of these credit ratings and, thus, their producers. Not surprisingly, credit rating agencies became not only the deputies of regulators (regulation by ratings): they also became subject to regulation. While these regulations remained unobtrusive and rather indirect for decades, they have become more direct and, hence, more publicly debated in the 21st century. This paper illustrates the little-known history of the regulation of ratings first. Thereafter, modern attempts to justify this regulation are scrutinized, leading to a rather sceptical assessment of the current, rather crisis-driven regulatory approach.
European Business Law Review