AFP, London :
ARC Ratings, five credit ratings agencies mainly from emerging markets, launched Thursday a rival to the sector’s main players including Fitch and Moody’s.
Pitching itself as a new international credit ratings agency, ARC hopes also to take clients from Standard & Poor’s (S&P), which along with Fitch and Moody’s, faced heavy criticism following the financial crisis.
ARC said it would introduce new financial risk ratings to sit alongside long- established debt grades such as the top triple A rating. But it will not use the term “junk” to describe non- investment grades.
Five credit rating agencies from Africa, Asia, Europe and Latin America-all of which were established at the time of the financial crisis in 2008 — have jointly created Europe-based ARC Ratings to serve clients wishing to use international debt markets.
“The world has changed dramatically since the collapse of the US subprime debt market in 2008 which triggered the credit crunch,” ARC chief executive Jose Pocas Esteves said at the launch in London.
“ARC and its five founding partners believe that the old methods and approaches are no longer sufficient.”
Investors use ratings agencies to categorise likely returns and risks on financial instruments ranging from government debt to bonds issued by companies.
Changes to ratings can affect the levels of financial returns earned by lenders and costs to borrowers.
Ratings are also important for pension and mutual funds, as they are often limited to investing into assets which have been rated a certain level by the agencies.
—ARC introduces new ratings to the market—
“We will introduce a new rating, that is a Systemic Risk Rating (SRR),” ARC’s chief ratings officer Uwe Bott told reporters at the launch.
“These risks could be for example the so-called tapering by the Federal Reserve… and what the impact might be on markets” going forward.
The main agencies were criticised in the wake of the financial crisis for allegedly being too backward-looking.
