Holding Global Regulators Accountable: The Case of Credit Rating Agencies

Credit Rating Agencies (CRAs) are private nonmajoritarian regulators (NMRs) of international capital markets. Ratings of creditworthiness are ubiquitous in financial markets, and in this way they exercise considerable control over the flow of credit. CRAs entail a puzzle for the question of the legitimacy of global regulation. As profit seeking firms, they lack a formal element of coercion. Yet, CRAs are often criticized for wielding illegitimate power. Furthermore, the broad demand for accountability has not had a great effect on how CRAs operate. Thus, there is a persistent mismatch between demand and supply of accountability, an “accountability gap.” By analyzing the accountability gap, this article seeks to enhance the understanding of the nature and the scope of the legitimacy problems of global NMRs. CRAs suggest that the legitimacy problems of global governance extend beyond formal NMRs to informal NMRs and that solutions sometimes are elusive.