Weaknesses and Disadvantages of Credit Rating Agencies on Modern Financial Markets

The three major credit rating agencies of the world for many years have an important impact on global financial trends. On their evaluation, conditions under which the states and other entities can borrow the money through the capital market significantly depend. Until the outbreak of financial crisis in 2008, which is relocated from the U.S. to the rest of the world, the participants in the financial market are unconditionally believed in assessments of credit rating agencies and no one noticed a conflict of interest in their business. The financial crisis has contributed to re-examine the role and importance of credit rating agencies in the global financial market. The paper discusses the current developments in the financial markets and extracts the key factors that have contributed to the credit rating agencies to become, from the extremely powerful and respected institution, institutions that are accused of abuse of monopoly and lack of professionalism in their work