EPRS
The impact of regulatory changes on rating behaviour
Abstract
- Abstract
We examine rating behaviour after the introduction of new regulations regarding Credit Rating
Agencies (CRAs) in the European securitisation market. - There is empirical evidence of rating catering in the securitisation market in the pre-GFC period (He et al.,
2012; Efing and Hau, 2015). - Competition among
CRAs could diminish ratings quality (Golan, Parlour, and Rajan, 2011) and promotes rating shopping by
issuers resulting in rating inflation (Bolton et al., 2012). - This paper investigates the impact of the post-GFC regulatory changes in the European
securitisation market. - In 2011, in addition to the creation of
European Securities and Markets Authority (ESMA), a regulatory and supervisory body for CRAs was
introduced. - We examine how rating behaviours have changed in the European securitisation market after the
introduction of these new regulations. - We utilise the existence of multiple ratings and rating agreements between
CRAs to identify the existence of rating shopping and rating catering, respectively (Griffin et al., 2013; He
et al., 2012; 2016). - We find that the regulatory changes have been effective in tackling conflicts of interest between issuers
and CRAs in the structured finance market. - Rating catering, which is a direct consequence of issuer and
CRA collusion, seems to have disappeared after the introduction of these regulations. - There is empirical evidence of rating catering in the securitisation market in
the pre-GFC period (He et al., 2012; Efing and Hau, 2015). - Competition among CRAs could diminish ratings quality (Golan, Parlour,
and Rajan, 2011) and promotes rating shopping by issuers resulting in rating inflation (Bolton et
al., 2012). - This paper investigates the impact of the post-GFC regulatory changes in the European
securitisation market. - In 2011, in addition
to the creation of European Securities and Markets Authority (ESMA), a regulatory and
supervisory body for CRAs was introduced. - We find that the regulatory changes have been effective in tackling conflicts of interest
between issuers and CRAs in the structured finance market. - Rating catering, which is a direct
consequence of issuer and CRA collusion, seems to have disappeared after the introduction of
these regulations. - Investors who previously demanded higher spreads for rating agreements for a
multiple rated tranche, did not consider the effect of rating harmony as a risk in the post-GFC
period. - Regarding rating shopping, we find that the effectiveness of the changes has been limited,
potentially for two reasons. - Additionally, we also find that rating over-reliance might still be an issue, especially
Rating catering is a broad term and it can involve rating shopping. - They re-examine the rating shopping and rating
catering phenomena in the US market by looking at the post-crisis period between 2009 and 2013. - Using 622 CDO tranches, they also observe the existence of rating shopping and the diminishing
of the rating catering. - Firstly, our main focus is the EU?s CRA Regulation and its effectiveness in reducing
rating inflation and rating over-reliance. - To the best of our knowledge, this paper is the first to
examine the effectiveness of the EU?s CRA regulatory changes on the investors? perception of
rating inflation in the European ABS market. - Hence, the coverage and quality of our dataset constitutes significant addition
to the literature and allows us to test the rating shopping and rating catering more authoritatively. - The following section reviews the literature
on securitisation concerning CRAs and conflicts of interest, and outlines the regulatory changes
introduced in the post-GFC period. - Firstly, ratings became ever more important as the Securities and
Exchange Commission (SEC) 5 began heavily relying on CRA assessments for regulatory purposes
(i.e. - the investment mandates that highlight rating agencies as the main benchmark for investment
eligibility) (SEC, 2008; Kisgen and Strahan, 2010; Bolton et al., 2012). - issuers) as one of the main explanations for the rating inflation (He et al., 2011; 2012; Bolton
et al., 2012; Efing and Hau, 2015). - Bolton et al., (2012) demonstrate that competition
promotes rating shopping by issuers, leading to rating inflation. - The last phase, CRA III, was implemented in mid-2013 and involves an additional
set of measures on reducing transparency and rating over-reliance. - As mentioned above, rating inflation can be caused by rating shopping
In order to be eligible to use the STS classification, main parties (i.e. - The higher the difference in the number of ratings for a
given ABS tranche, the greater the risk of rating shopping. - Alternatively, the impact of the new
regulations could be limited when it comes to reducing rating shopping. - This is because, firstly,
the conflict of interest between securitisation parties is not necessarily the sole cause for the
occurrence of rating shopping. - L is a set of variables (Multiple ratings, CRA reported, Rating agreement) that
we utilise interchangeably to capture the rating shopping and rating catering behaviour. - Hence, issuers are incentivised to report the highest possible rating and
ensure each additional rating matches the desired level. - All in all, our results suggest that
the new stricter regulatory measures have been effective in tackling conflicts of interest and
reducing rating inflation caused by rating catering. - Self-selection might be a concern in analysing the impact of the
new measures and investors? response with regard to the rating inflation. - This
result is in line with the earlier findings suggesting that regulatory changes have reduced investors?
suspicion of rating inflation and increased trust of CRAs. - Conclusion
Several regulatory changes were introduced in Europe following the GFC aimed at tackling
conflicts of interest between issuers and CRAs in the ABS market. - Utilising a sample of 12,469
ABS issued between 1998 and 2018 in the European market, this paper examined whether these
changes have had any impact on rating inflations caused by rating shopping and rating catering
phenomena. - We find that the
effectiveness of the changes has been more limited on rating shopping potentially for two reasons. - Tranche Credit Rating is the rating reported for a tranche at launch.
The NHS East Genomic Medicine Service Alliance Harnesses PhenoTips’ Genomic Health Record in a Milestone Regional Transformation Project
The NHS’ East Genomic Medicine Service Alliance (GMSA) is harnessing PhenoTips’ cloud-based Genomic Health Record in a first-of-its-kind regional transformation project to evaluate the centralisation and equitable embedding of genomic medicine and genomic testing into patient care pathways.
- The NHS’ East Genomic Medicine Service Alliance (GMSA) is harnessing PhenoTips’ cloud-based Genomic Health Record in a first-of-its-kind regional transformation project to evaluate the centralisation and equitable embedding of genomic medicine and genomic testing into patient care pathways.
- The East GMSA, and the associated East Genomic Laboratory Hub (GLH), strives to provide timely diagnoses and personalised medical care to the 8.3 million people living in the East Midlands and East of England region, regardless of where they live or which hospital they are treated at.
- PhenoTips’ Genomic Health Record will act as a cloud-hosted centralised database for genomic information, enabling access and collaboration between the region’s Trusts, beginning with two of the three Trusts whose testing laboratories comprise the East GLH.
- In addition, the implementation at the East GMSA will act as a pilot project to model genomic mainstreaming across the NHS, with the potential to expand PhenoTips into other alliances to support equitable access to genomic medicine and genomic testing across England.
Healthcare Executive Angela Single Joins Novari Health
LONDON, Nov. 21, 2023 /PRNewswire/ -- Novari Health is pleased to announce that Angela Single has joined Novari as Director, UK Business Development.
- LONDON, Nov. 21, 2023 /PRNewswire/ -- Novari Health is pleased to announce that Angela Single has joined Novari as Director, UK Business Development.
- Angela is a seasoned executive in the field of digital health.
- John Sinclair, Chief Executive Officer of Novari Health UK Ltd., commented "Angela's clinical, administrative, and digital health experience make her an invaluable addition to the Novari global team, and we are thrilled to welcome her as our director of UK business development.
- From its beginnings in Canada in 2003, Novari Health has focused exclusively on helping publicly funded healthcare systems to improve access to care.
Revolutionizing Metric Goal Setting: A Patent to Counter Destructive Behaviors and Common Pitfalls
This incident wasn't an isolated case but rather a reflection of a pervasive issue in metric reporting and goal-setting across various organizations.
- This incident wasn't an isolated case but rather a reflection of a pervasive issue in metric reporting and goal-setting across various organizations.
- This innovative system addresses the gaps in metric reporting and paves the way for substantial process enhancements.
- This oversight can lead to a lack of encouragement for process improvement, which is crucial for enhancing future metric outcomes.
- Enter Smarter Solutions, Inc.'s groundbreaking patent: "Systems and Methods for Measuring and Reporting Enterprise Performance and Making Process Improvements."
Forbes Social Awards: Pomilio Blumm shines as top-notch agency
The Forbes Social Awards showcased the significant influence of institutional communication on both society and the economy.
- The Forbes Social Awards showcased the significant influence of institutional communication on both society and the economy.
- During the ceremony , numerous recipients of awards were associated with campaigns overseen by the communication agency Pomilio Blumm.
- Thanks to its narrative strategies, this Italian agency has shown remarkable adaptability in navigating the evolving international landscape of the EU.
- According to PRovoke, the specialized website that published ICCO's data, Pomilio Blumm achieved these results by securing international contracts successfully, resulting in highly positive financial outcomes.
CereCore International Earns MEDITECH Hardware Integrator Certification
LONDON, Aug. 1, 2023 /PRNewswire/ -- CereCore International today announced the company is a certified hardware integrator for MEDITECH in the United Kingdom and Ireland and is providing end-to-end healthcare IT services to hospitals as they implement MEDITECH Expanse.
- LONDON, Aug. 1, 2023 /PRNewswire/ -- CereCore International today announced the company is a certified hardware integrator for MEDITECH in the United Kingdom and Ireland and is providing end-to-end healthcare IT services to hospitals as they implement MEDITECH Expanse.
- "We have a 30-year history working as partners with MEDITECH to implement and support their software in U.S. hospitals.
- "As a MEDITECH-certified hardware integrator, we can help hospital IT leaders and teams plan and budget for their hardware and technical infrastructure needs," said Darren Robinson, director of technology and cloud at CereCore International.
- We are proud to work with partners like CereCore International who have the expertise to help us achieve that," said MEDITECH International CEO Charlotte Jackson.
CereCore International Earns MEDITECH Hardware Integrator Certification
LONDON, Aug. 1, 2023 /PRNewswire/ -- CereCore International today announced the company is a certified hardware integrator for MEDITECH in the United Kingdom and Ireland and is providing end-to-end healthcare IT services to hospitals as they implement MEDITECH Expanse.
- LONDON, Aug. 1, 2023 /PRNewswire/ -- CereCore International today announced the company is a certified hardware integrator for MEDITECH in the United Kingdom and Ireland and is providing end-to-end healthcare IT services to hospitals as they implement MEDITECH Expanse.
- "We have a 30-year history working as partners with MEDITECH to implement and support their software in U.S. hospitals.
- "As a MEDITECH-certified hardware integrator, we can help hospital IT leaders and teams plan and budget for their hardware and technical infrastructure needs," said Darren Robinson, director of technology and cloud at CereCore International.
- We are proud to work with partners like CereCore International who have the expertise to help us achieve that," said MEDITECH International CEO Charlotte Jackson.
Liverpool Women's is First to Complete Modern EPR Milestone
LONDON, July 25, 2023 /PRNewswire/ -- CereCore International today announced Liverpool Women's is the first National Health Service (NHS) Foundation Trust to go-live on MEDITECH Expanse and has become the first NHS organisation in the UK to achieve this milestone. Since January 2023 CereCore International has been working with Liverpool Women's on their effort to transition from MEDITECH Magic to MEDITECH Expanse.
- Since January 2023 CereCore International has been working with Liverpool Women's on their effort to transition from MEDITECH Magic to MEDITECH Expanse.
- "Liverpool Women's Hospital has undertaken a significant programme of work replacing the Trust's legacy Patient Administration System (PAS) with a modern electronic patient records (EPR) solution.
- Together with our EPR vendor [MEDITECH] and CereCore we were able to deliver our go-live successfully and on time."
- A successful EPR implementation like this shows what's possible when you have the right expertise working toward a common goal.
Liverpool Women's is First to Complete Modern EPR Milestone
LONDON, July 25, 2023 /PRNewswire/ -- CereCore International today announced Liverpool Women's is the first National Health Service (NHS) Foundation Trust to go-live on MEDITECH Expanse and has become the first NHS organisation in the UK to achieve this milestone. Since January 2023 CereCore International has been working with Liverpool Women's on their effort to transition from MEDITECH Magic to MEDITECH Expanse.
- Since January 2023 CereCore International has been working with Liverpool Women's on their effort to transition from MEDITECH Magic to MEDITECH Expanse.
- "Liverpool Women's Hospital has undertaken a significant programme of work replacing the Trust's legacy Patient Administration System (PAS) with a modern electronic patient records (EPR) solution.
- Together with our EPR vendor [MEDITECH] and CereCore we were able to deliver our go-live successfully and on time."
- A successful EPR implementation like this shows what's possible when you have the right expertise working toward a common goal.