The Credit Rating Industry - FEDERAL RESERVE BANK of NEW YORK

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Quarterly Review

The Credit Rating Industry

Summer-Fall 1994 Volume 19, Number 2

Authors: Richard Cantor and Frank Packer

Investors and regulators have been increasing their reliance on the opinions of the credit rating agencies. This article shows that although the ratings provide accurate rank-orderings of default risk, the meaning of specific letter grades varies over time and across agencies. Noting that current regulations do not explicitly adjust for agency differences, the authors argue that a reassessment of the use of ratings and the adequacy of public oversight is overdue.

PDF full article PDF

26 pages / 2,116 kb

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