Issuers of debt instruments to be assessed by credit rating

Issuers of debt instruments to be assessed by credit rating
agency

JAKARTA (JP): The government will soon introduce a new
regulation requiring all issuers of commercial papers and bonds
to be assessed by the newly established credit rating agency, an
official says.

"The new regulation is now being finalized by the Capital
Market Supervisory Board (Bapepam) and Bank Indonesia (the
central bank) and will be enforced in coincidence with the start
of the newly established credit rating agency, PT Pemeringkat
Efek Indonesia (Pefindo), in July," Bapepam's chairman, Bacelius
Ruru, said here on Tuesday.

Ruru said a credit rating system is needed to minimize
defaults on debts as well as credit risks to the public and
investors.

"We hope the new ruling will promote the secondary market of
debt instruments such as bonds," he added.

Ruru made the remarks at a business luncheon which was jointly
organized by Pefindo and Enteos Bankers & Industrialists and
Social Club here.

Robin Monro-Davis, a managing director of the London-based
International Banking Credit Analysis credit rating agency, also
briefed the meeting on credit rating agencies around the world.

"The government will strongly enforce the ruling on the credit
rating assessment because it will give our money markets more
credibility," he said.

He said countries such as Singapore, Thailand and Malaysia
have already set up their own credit rating agencies.

He was optimistic that the existence of an agency will improve
the confidence both of foreign investors and other international
institutions in the country's money markets.

Indonesia's first credit rating agency, Pefindo, was set up on
Dec. 22 last year. It was owned jointly by several pension funds,
the Jakarta Stock Exchange, Surabaya Stock Exchange, Taspen,
state-owned banks, securities companies, insurance firms and the
Indonesian leasing companies association.

He said that establishing the agency is part of the
government's effort to promote a sound money market since many
foreign investors appear jittery over the creditworthiness of the
issuers of debt instruments.

Independence

"The agency should be independent and profess a high degree of
integrity in executing its job," Ruru pointed out.

He suggested that Pefindo cooperate with international credit
rating agencies such as Britain's IBCA, and the U.S. Standard &
Poor's and Moody.

"I believe such cooperation will help improve the ability and
integrity of Pefindo," he added.

Pefindo's president E.A. Koetin told The Jakarta Post that his
agency should indeed be highly independent in conducting credit
assessments.

Meanwhile, Monro-Davis told reporters that the recent dismal
rating given to Indonesia's banking industry by Standard and
Poor's should not be seen as discouraging.

"The assessment reflected its independence, which is usually
very difficult to accept for politically well-connected
institutes," he said.

He said that his agency will fully support Pefindo's efforts
to train its staff and provide various technical assistance.
(fhp)