Bank Regulations Still Over-Reliant on Credit Ratings, FSB Says

Global regulators called on nations to accelerate efforts to decrease reliance on credit ratings.

Regulatory reliance on ratings can lead to “herd behavior and cliff effects in market prices when downgrades occur,” the Financial Stability Board said in a report to leaders of the Group of 20 nations.

“The U.S. has moved the furthest in removing hard-wiring of ratings, and the EU has also made significant progress,” the FSB, which brings together G-20 regulators and central bankers, said in the report. “Progress in most other jurisdictions has been slower.”

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