actions of credit ratings play a crucial role in the regulation of financial market. For the coverage of risk under European Unions, finance based organizations should understand the need of maintaining minimum scope of the capital. This conducts operations as buffering losses unexpected and even protecting depositors. Also, these barriers play a crucial role in stabilizing the financial system. Under the framework of Basel II, banks can be successful in computing requirements of capital by the use of credit rating under approved agencies of credit rating (Dufour et al., 2012). Also, if finance based institution consider borrowing from central bank, and then there is a requirement of adequate assets by central banks with minimum rating for collateralizing. A code of conduct was published by the International Organization of Securities Commissions (IOSCO) in the year 2004 and all major agencies of credit rating signed this. Agencies of credit rating should put in efforts of delivering opinions that assisting in decreasing the asymmetry information. Changing condition of finance over the issuer has to be revealed, since otherwise they may end up misleading the participants of market. In reacting to the role played by agencies of credit rating during the event of financial crisis, the IOSCO had been successful in strengthening each and every principle under the fundamentals of the Code of Conduct (Dardour, 2013). The Commission of Securities and Exchange are known to be assigning the Statistical Rating Organizations of National Recognition. For estimating the required value of capital of finance based institutions, they utilize each and every rating of NRSRO. As a significant example, some of the investors of mutual funds and pension funds at times are only allowed for investing in debt rated by investment grade. As a matter of fact, these types of volatility end up exacerbating the scope of financial instability along with its unpredictability, as high levels of volatility are in association with the perspective of market participants on higher risk (Creighton et al., 2007). In addition, this increment in perceived risk and volatility appears to be having similarly unwarranted impacts with respect to uncertainty of macroeconomic factors by the amplification of volatility in output.