Asia should have its own regional ratings agency to challenge industry leaders Fitch, Standard & Poor’s and Moody’s, Cesar Purisima, finance minister for the Philippines, said on Wednesday.
Purisima, speaking at FinanceAsia’s annual Borrowers & Investors Forum, Southeast Asia, in Singapore, said the ratings industry faces a battle to remain relevant amid accusations that it failed to anticipate the global financial crisis and possibly even contributed to it by underestimating some credit risks.
“If I were a ratings agency guy I’d be worried – because this is about the relevance of ratings,” he said, noting the massive degree to which the three US groups dominate the industry. “The region needs a regional credit rating agency that understands the region; that is not looking at a methodology that is geared towards the old model of the western world.”
The comments from Purisima come in spite of the Philippines' promotion this year to “investment grade” by all three of the leading ratings firms -- a move which, he reiterated, had come too late and was, perhaps, still not generous enough.
“The investment grade rating is a long-delayed affirmation. The market has been rating us 2 to 3 notches higher. In fact we are still the most underrated country probably in the region,” he said, adding to comments made at the time of Moody's upgrade in early October.
Asia does not have a serious challenger to Fitch, Standard & Poor’s and Moody’s, although Universal Credit Ratings Group – a Chinese-Russian-US joint venture – is awaiting a license.
UCRG, based in Hong Kong, is positioning itself as complimentary to the Big Three, with a view to restoring confidence in the ratings industry across the region.
The group is fronted by former French prime minister Dominique de Villepin, who also feels the credit ratings industry needs shaking up.
“We are creating a new credit ratings agency and a new method, which is very important because not only do you need a new one, based here in the region, but also you need a new approach,” De Villepin told FinanceAsia in an interview. “My feeling is that nobody can rely on the old methodology and old system.”
Purisima, meanwhile, said regional knowledge was paramount.
“The important thing is that ratings are more sensitive to the realities on the ground, for example when they were holding back the Philippines for a long time, per capita was a big ratings issue. I told them the countries that are getting into trouble are the high per capita countries,” he said.
“Ratings are going to play a very important role [in the development of Asian debt markets].”
