The market for the credit ratings of Chinese firms is large and growing. We analyse Chinese firms that have ratings from both domestic and global agencies. Despite the similar symbols, the rating scales of the domestic and global agencies clearly differ – as any single company's global agency and domestic agency ratings differ by 6–7 notches on average. Focusing on the comparable rank ordering of domestic and global credit ratings, we test general hypotheses about the impact of the ratings industry structure on ratings outcomes. While potential ownership-related conflicts of interest and growth of the business are not consistently associated with higher ratings, ratings industry competition is related to inflated ratings. There is also weak evidence that the downgrade of the Chinese sovereign rating by foreign rating agencies has impacted the global ratings of corporations, particularly when they are state owned. While factors relating to rating industry structure do not significantly impact bond yields, both domestic and global ratings are significant factors in yield spread multivariate regressions, and thus appear to add value beyond financial variables.

This paper investigates the spillover effects of money market turbulence in 2007–08 on the short-term covered interest parity (CIP) condition between the US dollar and the euro through the foreign exchange (FX) swap market. Sharp and persistent deviations from the CIP condition observed during the turmoil are found to be significantly associated with differences in the counterparty risk between European and US financial institutions. Furthermore, evidence is found that US dollar term funding auctions by the ECB, supported by US dollar swap lines with the Federal Reserve, alleviated the level of dislocations, as well as the instability, of the FX swap market.

Many regulations use private sector credit ratings to determine investment prohibitions and capital requirements for institutional portfolio investments. These regulations implicitly assume that different agencies have equivalent rating scales, despite the fact that some agencies assign systematically higher ratings than others. We assess the appropriateness of these regulatory practices by testing whether observed rating differences reflect different rating scales or simply result from sample selection bias. Our analysis reveals only limited evidence of selection bias. We also ask what types of firms of firms are most likely to seek ratings from the agencies with higher rating scales. Our analysis uncovers no evidence that firms seek ratings from these agencies to clear specific regulatory hurdles or to reduce ex ante uncertainty about default risk.

Do banks price the risks of climate policy change? Combining syndicated loan data with carbon intensity data (CO2 emissions relative to revenue) of borrowers across a wide range of industries, we find a significant “carbon premium” since the Paris Agreement. The loan risk premium related to CO2 emission intensity is apparent across industries and broader than that due simply to “stranded assets” in fossil fuel or other carbon-intensive industries. The price of risk, however, appears to be relatively low given the material risks faced by some borrowers. Only carbon emissions directly caused by the firm (scope 1) are priced, and not the overall carbon footprint including indirect emissions. “Green” banks do not appear to price carbon risk differently from other banks.