Rating agencies activities vs. subprime crisis

The subprime crisis highlighted the inadequacy of rating agencies activities. Using the method of analysis contained in Ronald Coase’s theory of transaction costs, the author describes the market structure of credit rating services and mechanisms of its action, on the background of the subprime crisis. According to the author, despite the new regulations in the EU and the US aiming to improve transparency, reduce conflict of interest and change the rating methodology, till now it failed to remove the problems resulting from the oligopolistic market structure, the agency financing, and the lack of prudential standards alternative to the risk assessment’s rating.