This work examines the possible relation between credit risk and credit ratings, and the timeliness of this relation for the financial services. Investors and regulators use credit ratings as part of their decision making process and it is important to understand to which extend credit ratings reflect actual credit risk. This research focuses on the financial services because of the increasing credit risk over the years 2003 till 2007 and the strong commercial interests of credit rating agencies in this industry. A distorted relation between credit risk and credit ratings is most likely to...