BRICS rating agency plan gathering pace

Surabhi New Delhi | Updated on January 11, 2018 Published on May 04, 2017

Talks on with corporates, experts for finding a suitable agency

Plans of the five-nation BRICS bloc to set up its own credit rating agency seem to be gathering pace, with discussions being held with the corporate sector and experts on finding a suitable agency.

“The main issue is that the agency that conducts sovereign ratings can not be a government organisation. It has to be independent, with an international or at least regional reputation and credentials to be taken seriously at the global forum,” said a person familiar with the development.

Discussions are now on with industry representatives as well as financial and economic experts on whether an existing agency should be roped in or a new institution set up to conduct sovereign ratings.

“As of now, it is more of an academic discussion. A finalised proposal could be announced maybe in the second half of the year,” said the person.

Concerned by the methodologies of global rating agencies that they often perceive as “unfair”, BRICS nations — Brazil, Russia, India, China and South Africa — had in 2015 first proposed an independent BRICS Ratings Agency.

This was then, in October 2016, made a part of their joint declaration and would be “based on market-oriented principles, in order to further strengthen the global governance architecture”.

Ratings peeve

BRICS countries have frequently complained of being assigned low credit ratings by the three top global agencies despite showing better fundamentals than many peers and even some European economies.

While China enjoys a higher rating, member countries such as South Africa and India have junk and lowest investment grade ratings respectively.

India through the Finance Ministry has been calling for a ratings upgrade by international ratings agencies based on its high growth and improved fiscal situation.

In fact, unhappy with the low ratings, the Economic Survey 2016 had also questioned why India was not given a rating upgrade by global agencies while giving an upgrade to China.

Earlier, this week, Fitch also left India’s ratings unchanged at BBB- with a stable outlook, which is the lowest investment grade.

Published on May 04, 2017

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