THE REGULATORY USE OF CREDIT RATING: A TWO-EDGED SWORD

Abstract

This paper discusses the uses ofcrediting ratingfor regulatory purpose. Itfocuses on the Basel Accords and the use ofcredit ratings in the Accords to increase the safety and soundness ofinternationally active banks. The paperfocuses mainly on the Basel Accords and rating ofdeveloping countries such as Thailand. In developing countries, the Basel Accords have an impact on the wayfinancial institutions manage their reserve requirementsfor risky assets. Split rating and Rating shopping are also discussed as foreseen problems ofcredit rating.