Description
While Credit Rating Agencies (CRAs) have long demonstrated their resilience in the face of global financial crises and scandals, their role in global finance remains subject to change in light of new developments. This paper analyzes the future of the politics of credit rating, considering three key dimensions that will modify the authority of CRAs in financial markets: First, new players such as China, the BRICS, and the G20 are reshaping power dynamics in global economic governance. This raises questions about the prospects for emerging rating agencies to challenge the established US oligopoly. Second, the growing prominence of Environmental, Social, and Governance (ESG) rating agencies has the potential to disrupt the traditional rating agency landscape, particularly as ESG factors gain significance in investment decision-making. Third, the ascendancy of index providers and asset managers as influential capital gatekeepers in the era of passive investment implies a multipolar and fragmented authority structure within financial markets. Competitive pressures, both from within and outside the rating industry, are expected to challenge the enduring dominance of the traditional rating oligopoly. As CRAs continue to provide authoritative assessments of bond issuers’ creditworthiness, thus fulfilling a constitutive function, their epistemic authority is poised to endure in the context of disintermediated financial markets.
