Securitization: Rating Agencies

An essential part in the securitization process is achieving a credit rating for asset-backed securities. Credit rating agencies (CRAs) play a key role in assessing the underlying risks and setting an appropriate rating. However, the poor evaluation of subprime mortgage collateral by CRAs in the period immediately prior to the global financial crisis has been the subject of much debate. Here explore the subprime controversy, conflicts of interest issues, and the role of CRAs in securitization more generally.