This distortion of ratings can largely be seen as essentially a structural problem. In the current structure of the “issuer-pays model”, the issuers themselves pay the rating fees and rating agencies are able to provide consulting services to these issuers.
In order to hide their assessment errors, credit rating agencies tend to persist in assigning high credit ratings even when an issuer faces a high probability of insolvency. Of course, surveillance outcomes using such less than adequate ratings undoubtedly hamper appropriate policy decisionmaking. Recently, FSB has finalized proposals for reducing reliance on CRA ratings.