Credit Rating Agencies and their Impact on Spreading the Financial Crisis on the Eurozone

Credit rating agencies are an important part of the globalized financial system and thus influence the global economy. Their role is to assess the level of credit worthiness of debt issuers for potential investors in private and public sector. Yet, after every financial crisis and/or defaults of particular companies and sovereigns, the credit rating agencies become the focal point of criticism by economists, politicians, media, etc. The reason for this lies in the inability of the credit rating agencies to do the job they are supposed to do i.e. risk signaling. This paper builds on that assessment, while focusing on three biggest credit rating agencies – Standard & Poor’s, Moody’s Investors Service and Fitch Ratings and their influences on spreading the financial crisis on the Eurozone.