If prudential regulation, in particular Basel II, allows banks to make reference to external ratings, there must be mechanisms that assert that these ratings have been done according to agreed standards. Within banks and financial institutions the conflicts of interest are numerous, starting from the management and the Board to the whole structure of market practices.
The incentive to maximise profits over the short term, as the competitors are doing, to hire and remunerate with a short term perspective, to pass on the losses to clients that are unaware, to advise clients and provide them the financing, are at the roots of the conflicts. We haven’t discovered many things new from the recent crisis.