Abstract

Vandana Gupta, R. K. Mittal and V. K. Bhalla

The objective of this paper is to critically examine the role of credit rating agencies in the sub-prime
crisis. The paper traces the development of the sub- prime crisis from its origin till the aftermath. It
studies the weaknesses of credit rating agencies in performing their basic function of timely and
accurate rating of bond obligations. The paper then scrutinizes the diversification of credit rating
agencies into the structuring and rating of complex securitized products. This raises fundamental issue
of the independence and accountability of these agencies. The paper comes to the conclusion that
appropriate changes in the regulatory framework of credit rating agencies are necessary to help avert
similar crises in the future.