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Asia should put in place the conditions required to develop credible domestic credit rating agencies, to promote healthy bond markets in the region, according to the participants at a seminar on "Domestic Credit Rating Agencies in Asia - Roles, Issues, and Challenges," held on the sidelines of ADB's 37th Annual Meeting of the Board of Governors.
"In order to develop deep and well-functioning bond markets, it is indispensable to have a high quality rating system in order to fill the information asymmetry between issuers and investors, said Daikichi Momma, Director of the Regional Financial Cooperation Division of Japan's Ministry of Finance.
Domestic credit rating agencies in Asia are considered to be softer and less credible than the global credit rating agencies such as Standard and Poor's, Moody's, and Fitch, the seminar heard. There are also vast differences in rating practices among domestic credit rating agencies across Asia.
The region should strive for achieving harmonization of rating practices among Asia's domestic credit rating agencies. This would require cross-country training in international best practices, but adapted to take into account specific factors in Asian economies, said Santiago F. Dumlao, Jr., Secretary-General of the Association of Credit Rating Agencies in Asia (ACRAA). ACRAA was set up in September 2001 as a regional forum for developing Asia's nascent credit rating industry.
Governments and financial market regulators should play a supportive role in creating an enabling environment for the development of local credit rating agencies in their respective countries, said Rajagopalan Ravimohan, Managing Director and Chief Executive Officer, CRISIL, India.
Another participant, Kazumi Takemoto, Managing Director, Moody's Investors Service, made the point that to improve the credibility of domestic credit rating agencies, it is important to strengthen their technical and human resource capabilities.
"Given the increasing support and initiatives for establishing an Asian bond market, opportunities abound for domestic credit rating agencies to expand beyond their domestic shores, the demand for regional ratings will gain greater importance over time," added Mr. Suresh Menon, Executive Director, Rating Agency Malaysia Berhad.
Mr. Yasuhiro Harada, Executive Vice President of Rating and Investment Information, Inc., Japan, saw a significant and increasing role for domestic credit rating agencies in structured finance and asset-backed securitization, particularly in banking sector reforms in Asia.
.... South and Southeast Asian Corporate Report Card
.... Asian Development Outlook 2004
.... Banking Sector Reforms in Asia
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