Ratings in structured finance: what went wrong and what can be done to address shortcomings?

July 2008

Summary

The credit market turmoil has raised questions about the effectiveness of credit rating agencies' assessments of risks in rating structured finance products. The study group report on ratings in structured finance under the chairmanship of Nigel Jenkinson of Bank of England draws on the lessons that have been learnt during the credit turmoil on vulnerabilities of ratings of structured finance products. The report then explores ways to improve the credibility of ratings of structured finance products while highlighting the inevitable uncertainties attached to them and sets out a number of recommendations to address weaknesses that were identified. The report also incorporates a summary of feedback received during a consultation process with credit rating agencies and investors.