Why CCPs are the new rating agencies – and pose the same risks
The role played by rating agencies in the crisis is well documented, but the new regulatory framework gives similar powers and privileges to clearing houses – and leaves them exposed to the same weaknesses and temptations, argue Chris Kenyon and Andrew Green
At first glance, there is not much to unite credit rating agencies and central counterparties (CCPs). The parallel lies in the privileged position granted to both types of institution by regulators and, if nothing is done about it, the end result could be much the same – a sudden crisis, but one that is triggered by margin calls rather than structured credit downgrades.
Special influence was handed to the agencies from the mid-1970s onwards, as the US Securities and Exchange Commission and other
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