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.