The rating agencies are subject to an inherent conflict of interest which arises

Question

The rating agencies are subject to an inherent conflict of interest which arises from:

A. Their being too over-extended and over-committed insofar as rating service provision is concerned

B. Them not having access to sufficient data to guarantee an accurate rating and therefore always having to come up with a rating despite incomplete information

C. Them being in a constant struggle between themselves to achieve market domination

D. The government having an interest in the way they do business and constantly second guessing their actions

E. The fact that they are directly paid for their services by bond issuers who have an interest in obtaining the highest ratings possible

Explanation / Answer

The rating agencies are subject to an inherent conflict of interest which arises from:

E. The fact that they are directly paid for their services by bond issuers who have an interest in obtaining the highest ratings possible

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