Table Of ContentPrivate 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
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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
