Abstract
Credit Rating Agencies (CRAs) play a key role in the financial markets: credit rating provides useful information to investors, and it is also widely used for regulatory purposes. Nevertheless, after the subprime meltdown, CRAs have been strongly criticized for worsening the crisis by overrating structured products. Consequently, regulators are reforming the rating industry, worldwide. Therefore, this article investigates the changes regarding the role and regulation of CRAs, focusing on the European Union. To achieve this investigation, the study explores existing literature and examines the European reforms. The research contributes to the ongoing debate on the innovation in financial regulation, by highlighting the key-characteristics of the European approach to CRAs’ regulation and supervision. The results note distinct phases of regulation and highlight that certain gray areas relating to business model, overreliance and civil liability should not be ignored.
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