Posted Date : 16 Jan 2014
Malaysian Rating Corporation Berhad (MARC) announced today the creation of ARC Ratings S.A. (ARC), a European and network-based credit rating agency (CRA), which aims to address the global markets’ need for a new approach to credit rating and analysing credit default risk. ARC is the result of five credit rating organisations in the continents of Asia, Africa, Europe, and Latin America banding together to form a new global rating agency, each taking an equal stake in the venture.
Mohd Razlan Mohamed, CEO of MARC and a Board member of ARC, said at the launch of the new global agency, "Having already successfully provided credit rating services in the Malaysian market for the past 18 years, MARC, as a founding partner of ARC, is very excited and proud to be part of this initiative with four other credible credit rating agencies. I am confident that ARC Ratings can be a positive transformational force in the global rating landscape with its strong governance structure and global collaborative approach to ratings."
ARC was formerly known as Companhia Portuguesa de Rating (CPR), a company established 25 years ago in Portugal. The name change took place in October 2013 to reflect its new identity and transformation into a global rating agency. ARC is registered with the European Securities and Markets Authority (ESMA) and operates under its strict regulatory regime.
ARC aims 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. Uwe Bott, ARC Ratings’ Chief Ratings Officer, said, “The world has changed dramatically since the collapse of the U.S. sub-prime debt market in 2008 which triggered the credit crunch. ARC and its five founding partners believe that the old methods and approaches are no longer sufficient for the post-Lehman financial sector landscape. A large part of the current methodologies is insufficient in capturing new information elements which will change the way risk is being evaluated. Our approach adapts to a dynamically changing global environment, which requires constant re-invention of credit assessment.” The new multi-polar world economy requires a new approach, which ARC will provide through ratings which benefit from multiple perspectives and local expertise through its CRA partners and are free from any geographical, political or institutional bias.
ARC is introducing two innovative rating concepts: a Systemic Risk Rating (SRR) which allows for a holistic view of emerging risks to be integrated into all credit ratings, and a Financial Stability Rating (FSR) along the entire rating scale to serve as a rating ceiling in jurisdictions, where appropriate. ARC will also introduce a reconfigured rating scale that does not distinguish between investment grade and non-investment grade, but instead distinguishes between different levels of risk. ARC’s methodology will be dynamically adapted to keep pace with market needs.
ARC will rate sovereign debt, financial institutions, non-financial corporations as well as structured products. ARC is confident that it will also impart greater insight into the credit risk assessments of mid-sized issuers, which are of growing importance in a rapidly changing global environment and form the backbone of many economies, especially emerging markets.
ARC’s corporate governance structure is 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 CRA founding members of ARC are CARE Ratings of India, Global Credit Ratings Co. (GCR) of South Africa, Sociedade de Avaliação Estratégica e Risco Lda (SaeR) of Portugal (a holding company which, prior to the formation of ARC, held 100% of CPR) and SR Rating Group of Brazil. A broadening of the shareholder base is planned in the future.
The credit rating and credit risk-related businesses of ARC's founding partners generate about USD50 million of combined revenues annually. Collectively their analytical coverage spans a rating universe of over 6,000 rated clients, supported by over 400 analytical staff. On a combined basis, the five founding members maintain a geographical presence in nine countries in four continents via 18 offices. The partners also have, on average, a credit rating track record of about 20 years and combined financial reserves of about USD85 million in cash.
Contact: Milly Leong, +603-2082 2288/ milly@marc.com.my.
