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Credit rating agencies must reform, but it ain’t so black or white

Because of IL&FS, credit rating agencies have been caught snoozing. This has brought their business model and its inherent conflicts into question again. If broken, why is it in use?

06/11/18

Sidhartha Shukla

India is having a Lehman moment and rating agencies are at the epicentre of this crisis

Rating agencies failed to flag visible structural faults with IL&FS

These agencies work on an “issuer pays” model which is riddled with conflicts of interests

Since January 2017, Sebi has mandated all rating agencies to disclose ratings assigned by them. Has this helped?

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It’s hard to identify a system-wide implosion, much less be able to call one. But India may currently be having its own “Lehman Brothers Moment.” India’s Lehman Brothers is Infrastructure Leasing & Financial Services (IL&FS), a massive “shadow lender” to infrastructure projects across the country. Almost exactly a decade after the global financial crisis that…

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