While the issuer-fee model naturally creates a potential conflict of interest (that could lead to higher than warranted ratings), global experience indicates that the existence of this conflict does not by itself lead to lax rating standards. This is because reputation plays a crucial role in the credit rating discipline. Lax rating standards by any rating agency would lead to a loss of credibility with investors and an erosion of the ‘value’ associated with the ratings assigned by that agency. This would reduce issuer demand for ratings from that agency, consequently affecting its revenues. Thus, even though the issuer pays for the rating exercise, rating agencies have a strong incentive to maintain their independence due to the reputation and regulation risk arising out of lax rating standards.