Abstract
Despite their private status, credit rating agencies (CRAs) are institutionalized in financial system regulation, determining the capital regulated lenders in the European Union (EU) need to maintain and the eligibility of their assets to act as collateral with the European Central Bank. This amounts to government failure and is the result of the abdication by authorities of what should be a public function. Reversing this is difficult and costly but necessary, and debate is needed on possible solutions such as regulating CRAs as a utility, establishing a public CRA, re‐adopting pre‐determined capital charges, or employing market‐linked solutions.
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