ASEAN credit agencies may harmonize rating standards
ASEAN credit agencies may harmonize rating standards
MANILA (AFP): Southeast Asian credit rating agencies are to
discuss harmonizing rating standards for the region's booming
economies to meet the growing demands of its emerging capital
markets, officials said yesterday.
The plan was brought up during a conference of the Association
of Southeast Asian Nations (ASEAN) Forum of Credit Rating
Agencies (AFCRA) sponsored by the Manila-based Asian Development
Bank (ADB).
"Cross-border rating is extremely favorable in the region
where demand for financing is huge and growing," said Leo
O'Neill, president of U.S.-based international credit rating
agency Standard and Poor's.
AFCRA groups the credit rating agencies of the Indonesia,
Malaysia, the Philippines and Thailand. Brunei, Singapore and
Vietnam, the other members of ASEAN, are not represented in
AFCRA.
"There are very good prospects for cross-border ratings within
AFCRA but (members) have to agree first," Philippine Credit
Information Bureau Inc. (CIBI) president Jaime Ladao told
reporters after speaking at the conference.
Taratorn Premsoontorn, manager for financial institutions of
the Thai Rating and Information Services, said that differences
were expected to arise, such as disagreements on the measurement
of credit risks in complex ratings such as those involving a
government policy or regulatory support.
He said that "AFCRA members may have to expand their regional
credit rating further as large regional companies are likely to
expand their activities across countries in ASEAN."
Premsoontorn said cross-border ratings would "take into
account the creditworthiness of each country's sovereign currency
risk, which will establish a ceiling for ratings assigned to
other entities domiciled in that country."
Credit rating agencies assess the risks involved in lending
money to governments, financial institutions or businesses. A
lower rating reflects higher risk and makes borrowing more
expensive.
O'Neill, who was guest speaker, told participants that Asia's
economic boom was likely to spur "increased rating activity,"
pointing out that Asian Development Bank forecasts of
infrastructure development needs in Asia, excluding Japan, is
US$1 trillion.
In addition, he said Asia's large corporations were increasing
their demand for debt capital to finance the region's rapid
economic expansion.
"Today and for the near future, much of this demand will be
met from outside the region but increasingly it will be generated
from within the region and within local markets," said O'Neill,
whose company has rated nine Asian countries as investment grade
and three others below investment grade.
Philippine Finance Secretary Roberto de Ocampo, however, said
that ASEAN credit rating agencies required further strengthening
and institutional support.