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You're forgetting that many institutions can only accept/rely on ratings from regulator-approved companies. For example, the SEC has granted a ratings monopoly
by anamax 16y ago
You're forgetting that many institutions can only accept/rely on ratings from regulator-approved companies.
For example, the SEC has granted a ratings monopoly to three companies.
The idea is that ratings are too important to be left to some unapproved company. If anyone could issue ratings, folks might be led to make bad investments....
This is one example of how regulation is systemic risk.
- nl 16y agoIt might be possible to market directly to consumers in the retail market. I assume you'd need a licence to give financial advice, but that should be easier to get than the rating agency license (I assume). This is one example of how regulation is systemic risk. Well it sounds more like bad regulation to me.
- anamax 16y ago> > This is one example of how regulation is systemic risk. > Well it sounds more like bad regulation to me. Every regulation can be bad. However, unlike individual firm policy, regulation is system-wide, so the risk is necessarily systemic.