PETALING JAYA: ARC Ratings SA, a new Europe-based rating agency which counts Malaysian Rating Corp Bhd (MARC) as one of its founding partners, has said it will take an innovative approach to credit rating that will provide a much-needed shake-up of the industry.
In a statement issued yesterday, ARC said its five founding partners believed that the old methods and approaches were no longer sufficient. It is taking on established players – Fitch Ratings, Standard & Poor’s and Moody’s Investors Service – by doing away with ratings that distinguish between “investment grade” and “non-investment grade” debt.
ARC claims its methodology willbe dynamically adapted to keep pace with market needs according to the different levels of risk.
“I am confident that ARC can be a positive transformational force in the global rating landscape with its strong governance structure and global collaborative approach to ratings,” Mohd Razlan Mohamed (pic), chief executive officer of MARC and a board member of ARC, said in a statement to launch the new rating agency.
He said ARC’s corporate governance structure was designed to avoid conflicts of interest in the rating process. Its ownership structure currently provides for equal ownership positions for MARC and the other four founding members through a holding company based in Singapore.
The other founding members of ARC are CARE Ratings of India, Global Credit Ratings Co of South Africa, Sociedade de Avaliação Estratégica e Risco Lda or SaeR of Portugal and SR Rating Group of Brazil.
“A broadening of the shareholder base is planned in the future,” he said.
ARC’s chief rating officer Uwe Bott said the rating agency aimed to rebuild trust and enhance reliability and transparency in the international credit rating industry, which has suffered an immense loss of credibility in the wake of the global financial crisis.
“The world has changed dramatically since the collapse of the US sub-prime debt market in 2008, which triggered the credit crunch. A large part of the current methodologies is insufficient in capturing new information elements, which would change the way risk is being evaluated.
“Our approach adapts to a dynamically-changing global environment, which requires constant reinvention of credit assessment,” he said.
Bott said the new multi-polar world economy required a new approach, which ARC would provide through ratings which benefited from multiple perspectives and local expertise through its credit rating agency partners and were free from any geographical, political or institutional bias.