Credit Rating Information Value : A Metamorphosis of Public Information Assesment

The uniqueness of financial market is its ability to differentiate credit risks. Different from banking which credit channeling has only two decisions: yes or no, capital market gives both sides: issuers and investors can bargain the decision based on credit risk differential. Credit risk differential gives flexibility to the market. Different credit risks profile will make up different yields.There are only two profiles of credit risk of corporate bond, so‐called investment grade and non‐investment grade. Since capital (financial) market supervisors needs a standard metric of the credit quality of corporate bonds to valuate financial institutions bond portfolio (securities, insurance, mutual funds, banks) as a tool to calculate its minimum capital requirement, therefore credit rating agencies services requires.Classic cases such as Enron, WorldCom, Parmalat and most recently sub‐prime mortgage as well Indonesia cases such as Tjiwi Kimia, Pindo Deli, Lontar Papyrus and Bank Global, proofs of clear and present danger of relying on credit rating as a standard metric of the credit quality of bond issuer. This paper is not an empirical research but a securities law assessment for credit rating information value. From securities law perspective we have to make promptness comparison of information released by CRA and information released by issuers as mandatory disclosures requirements