Question

(ii) Many commentators state that misleading credit ratings had a direct and immense effect on the development of the Global Financial Crisis. Provide your a view on this statement, using examples from the recent crisis to support your arguments.

Answer 1

Answer:-

This statement is true indeed that misleading credit ratings had a direct and immense effect on the development of Global financial crisis.

Credit ratings are provided by credit rating agencies, which are very sophisticated and proffesional organization in their work. Ratings are given by them basis their research work and on special request of any business entity.

Final rating is being given by them basis all the fudamentals and this final rating has many users like FII's, Retail and wholesale investors, genral public and international stakeholders.

This rating is the base for the development of economy, It depicts the true picture of economy, industry at macro level. It boost the morale and confidence of the investor if rating is positive and stable, on the other hand if rating is downgraded or reduced it creates a negative perception and investors withdraw their money.

Therefore in Nutshell, misleading credit ratings have a huge direct impact on global finacial crisis.