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)