Question

Q. ‘Issuer-Pays’ Model, often mentioned in the news, is related to which of the following?

• A. World Trade Organisation
• B. Basel norms
• C. Credit Rating Agencies
• D. Payment banks issuing cheque drawn upon itself

Answer 1

The correct option is C Credit Rating Agencies

Explanation:

It is related to Credit Rating Agencies. In the issuer-pays model, the rated entity is a client of the rating agency and pays a fee for all rating activities. In the subscriber-pays model instead, the rating agency sells the ratings to stakeholders such as the rated entity’s suppliers, clients, investors, etc. There is a conflict of interest with the "issuer-pays" model because the fees to the CRA are paid by the issuer itself. This has to be switched to the investor-pays model.