10 December 2015
Risk assessment is critical to well-functioning capital markets. Yet reliance on the “big three” credit rating agencies has increased with the rise of international capital flows.  Their assessments have been strongly pro cyclical and have missed systemic risks.  Insufficient competition, conflicts of interest and ideological bias are some of the reasons for this, says UNCTAD Policy Brief.
The wide-spread use of their ratings has now come to be recognised as a potential threat to financial stability. Concerted reform of credit rating agencies is therefore urgently needed.
Key points
Risk assessment is critical to well functioning capital markets
The wide spread use of the ratings of credit rating agencies has come to be recognised as a potential threat to financial stability
Concerted reform of credit rating agencies is urgently needed
This policy brief is based on the Trade and Development Report, 2015, subtitled Making the International Financial Architecture Work for Development, published by UNCTAD.
