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Private Ratings, Public Regulations: Credit Rating Agencies and Global Financial Governance PDF

221 Pages·2011·3.44 MB·English
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Private Ratings, Public Regulations This illustration is taken from the original etching in Thomas Hobbes’ Leviathan of 1651. Palgrave Macmillan and the editors are grateful to Lucila Muñoz-Sanchez and Monika Sniegs for their help in redesigning the original to illustrate what ‘transformations of the state’ might mean. The inscription at the top of the original frontispiece reads ‘Non est potestas Super Terram quae Comparetur ei’ (Job 41.33): ‘there is no power on earth which can be com- pared to him’. In the Bible, this refers to the seamonster, Leviathan. (Original Leviathan image reprinted courtesy of the British Library.) Transformations of the State Series Editors: Achim Hurrelmann, Carleton University, Canada; Stephan Leibfried, University of Bremen, Germany; Kerstin Martens, University of Bremen, Germany; Peter Mayer, University of Bremen, Germany. Titles include: Outline of the themes of the series: Achim Hurrelmann, Stephan Leibfried, Kerstin Martens and Peter Mayer (editors) TRANSFORMING THE GOLDEN-AGE NATION STATE Moritz Weiss TRANSACTIONS COSTS AND SECURITY INSTITUTIONS Unravelling the ESDP Michael Dobbins HIGHER EDUCATION POLICIES IN CENTRAL AND EASTERN EUROPE Convergence towards a Common Model? Heinz Rothgang, Mirella Cacace, Simone Grimmeisen, Uwe Helmert, Claus Wendt THE STATE AND HEALTHCARE Comparing OECD Countries Anna Holzscheiter CHILDREN’S RIGHTS IN INTERNATIONAL POLITICS The Transformative Power of Transnational Discourse Kerstin Martens, Alexander-Kenneth Nagel, Michael Windzio and Ansgar Weymann (editors) TRANSFORMATION OF EDUCATION POLICY Steffen Schneider, Achim Hurrelmann, Zuzana Krell-Laluhová, Frank Nullmeier and Achim Wiesner DEMOCRACY’S DEEP ROOTS Why the Nation State Remains Legitimate Anja P. Jakobi INTERNATIONAL ORGANIZATIONS AND LIFELONG LEARNING From Global Agendas to Policy Diffusion Michael J. Warning TRANSNATIONAL PUBLIC GOVERNANCE Networks, Law and Legitimacy Thomas Rixen THE POLITICAL ECONOMY OF INTERNATIONAL TAX GOVERNANCE Hartmut Wessler (editor) PUBLIC DELIBERATION AND PUBLIC CULTURE The Writings of Bernhard Peters, 1993–2005 Hartmut Wessler, Bernhard Peters, Michael Brüggemann, Katharina Kleinen-von Königslöw and Stefanie Sifft TRANSNATIONALIZATION OF PUBLIC SPHERES Jochen Zimmerman, Jörg R. Werner and Philipp B. Volmer GLOBAL GOVERNANCE IN ACCOUNTING Public Power and Private Commitment Peter Starke RADICAL WELFARE STATE RETRENCHMENT A Comparative Analysis Jens Steffek, Claudia Kissling and Patrizia Nanz (editors) CIVIL SOCIETY PARTICIPATION IN EUROPEAN AND GLOBAL GOVERNANCE A Cure for the Democratic Deficit? Klaus Dingwerth THE NEW TRANSNATIONALISM Transnational Governance and Democratic Legitimacy Kerstin Martens, Alessandra Rusconi and Kathrin Leuze (editors) NEW ARENAS OF EDUCATION GOVERNANCE The Impact of International Organizations and Markets on Educational Policy Making Achim Hurrelmann, Steffen Schneider and Jens Steffek (editors) LEGITIMACY IN AN AGE OF GLOBAL POLITICS Joan DeBardeleben and Achim Hurrelmann (editors) DEMOCRATIC DILEMMAS OF MULTILEVEL GOVERNANCE Legitimacy, Representation and Accountability in the European Union Transformations of the State Series Standing Order ISBN 978-1-4039-8544-6 (hardback) Series Standing Order ISBN 978-1-4039-8545-3 (paperback) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and one of the ISBNs quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England Private Ratings, Public Regulations Credit Rating Agencies and Global Financial Governance Andreas Kruck Teaching and Research Associate, Geschwister-Scholl Institute for Political Science, University of Munich, Germany © Andreas Kruck 2011 Softcover reprint of the hardcover 1st edition 2011 978-0-230-28223-0 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-32811-6 ISBN 978-0-230-30738-4 (eBook) DOI 10.1057/9780230307384 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Kruck, Andreas, 1981– Private ratings, public regulations : credit rating agencies and global financial governance / Andreas Kruck. p. cm. Includes bibliographical references and index. 1. Credit ratings. 2. Credit bureaus. 3. International finance. I. Title. HG3751.5.K78 2011 3329.042—dc22 2011006612 10 9 8 7 6 5 4 3 2 1 20 19 18 17 16 15 14 13 12 11 Contents List of Tables ix List of Figures x List of Acronyms xi Series Editors’ Preface xiii Preface and Acknowledgements xv 1 Introduction: Private Ratings and Public Purposes 1 The transformation of governance: decentralizing and privatizing political authority 2 Why have states used credit ratings in regulation? The research question and its broader relevance 6 Research design 14 Core arguments and structure of the book 17 2 The Regulatory Use of Credit Ratings: Overview and Conceptualization 19 The credit rating industry: what ratings mean, how they are produced and why they are important 20 The use of credit ratings in national and international regulatory systems 33 Rating agencies’ standard of creditworthiness and its public enforcement 60 The regulatory use of credit ratings and the delegation of political authority 68 3 The Theoretical Model: An Embedded Resource D ependence View on Delegation 80 Principal–agent theory revisited: causes of delegation 82 A resource dependence view on delegation to specialized agents 87 Bounded rationality, cost–benefit analysis and the decision for delegation 104 vii viii Contents The macro- institutional conditions for resource dependence 108 Summary of the theoretical argument and hypotheses 123 4 Explaining Trend and Variation in the Regulatory Use of Credit Ratings 131 Intertemporal analysis: accounting for a common trend 131 Interregional analysis: explaining differences across regulatory systems 139 5 Making Sense of the Role of External Ratings in Basel II 145 Commonalities and differences in the positions of Basel II negotiators 146 Theoretical expectations and the Basel II provisions 152 6 Conclusion and Outlook: After the Crisis 155 Findings and implications of the book 155 Regulatory change after the global financial crisis: preliminary assessment and tentative outlook 158 Notes 166 References 174 Index 197 Tables 2.1 Credit rating symbols (long- term issue credit ratings) 24 2.2 The credit rating process (solicited ratings) 26 2.3 U se of credit ratings in the US regulatory system (1931–2006) 37 2.4 Regulatory use of credit ratings in selected countries 45 2.5 Recognition criteria for the use of credit ratings 47 2.6 Membership in the BCBS 51 2.7 Determination of risk weights in Basel I and Basel II 58 ix

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