BRICS Rating agency
1)
China, along with experts from the Brazil, Russia, India and South
Africa, is holding talks to form a BRICS rating agency that will break the
monopoly of the American Big Three — Fitch, Moody’s and Standard & Poor’s.
2)
Russian rating agency Sputnik and China’s Dagong rating agency at
the heart of the talks for creating a new independent agency.
3)
The demand for a parallel rating agency escalated after Western
agencies downgraded the creditworthiness of Moscow following the crisis in
Ukraine.
Ø Chinese Dagong feel that lowering
of Russia’s credit ratings by three Western rating agencies was politically
motivated.
4)
According to Chinese Rating agency, while arriving at a country’s
credit rating, the U.S.-based rating agencies applied the criteria of political
system, per capita GDP, independence of a country’s central bank, economic
system and the level of market privatization, as well as the right to issue
international currency reserves.
Ø They are all ideological criteria
and have nothing to do with a central government’s ability to generate revenues
and its ability to repay debts.
Ø These criteria are
unfair.
5)
BRICS countries have long deliberated on plans to establish their
own rating agency, along with the formation of the new development bank.
-------------------------------------------------------------------------------------------------------------------------------------
Credit Rating Agencies
1)
A
credit rating agency (CRA) is a company that assigns credit ratings, which rate
a debtor's ability to pay back debt by making timely interest payments and likelihood
of default.
2)
The
value of credit ratings for securities has been widely questioned. Hundreds of
billions of securities that were given the agencies' highest ratings were
downgraded to junk during the financial crisis of 2007-08.
3)
Credit
rating is a highly concentrated industry, the Big Three CRAs - Moody's, S&P
and Fitch control approximately 95% of the ratings business.
4)
Credit
rating agencies also issue credit ratings for sovereign borrowers, including
governments, states, municipalities and sovereign-supported international
entities.
5)
CRISIL
is the most influential rating agency in India.
-------------------------------------------------------------------------------------------------------------------------------------
No comments:
Post a Comment