The role of the ratings business, as an innovative approach, is to allow economic agents and investors to have access to data on the business climate.
However, it turned out that it is not easy to develop it adequately and agencies continue to find it difficult to settle in emerging markets, “said Mustapha Kamel Nabli, Governor of the Central Bank Tunisia, during a financial conference organized on Thursday by the Tunisian-British Chamber Commerce and Industry (TBCC) at the headquarters of UTICA. The aim is to highlight the role of ratings in the financing of the economy.
The Governor of the BCT sought to identify issues that hinder the development of ratings agencies. According to him, sovereign ratings agencies have inherent problems. They continue to suffer from credibility problems about their ratings and the nature of their work.
“There are always questions about how they arrive at conclusions on the quality of the risk of a company or a country,” he said.
Hence, an inherent conflict of interest arises and has not been resolved. Add to this the problems of market concentration and especially the lack of responses of ratings agencies to their criticisms on the various problems for developing countries.
“With an underdeveloped capital market, we stayed in a vicious cycle and a low-level equilibrium between market development and financial rating agencies,” said Mustapha Kamel Nabli, indicating that there is a fundamental contradiction between the need to have adequate ratings services and the hostility and lack of availability of companies to accept the ratings activity as a useful and necessary activity.
Which reforms?
“The problem is not simple because the ratings activity is not an exact science. Rather, it is assessments. Hence, it is very difficult to be perfectly transparent. In Tunisia, there is not enough effort in this area, “added the governor.
Given this situation, the country needs to develop capital markets to promote the banking sector. In this context, the central bank governor said the strategic role of the ratings business covers not only the promotion of capital markets but also the development of the banking sector, particularly the credit activity.
He cited the resort of banks, which are also subject of ratings, to capital markets to mobilize some of the resources they need. “The ratings business may be useful to better manage the risks from client companies. An important development in the ratings activity could even include other benchmarks for risk management for banks in their lending activities. ”
Sharing the same analysis, Aurélie Martin, analyst of sovereign credit rating, noted that ratings are a widely recognized indicator of credit risk. She said it is a tool that facilitates the process of issuing and buying debt securities. “It’s a way to provide an independent opinion on the creditworthiness of the issuer to the financial community.”
The analyst noted that the ratings are based on five essential elements: the institutional and political factors, economic structure and growth prospects, balance of payments and external financing needs, budget performance and flexibility, the burden of debt and contingent liabilities and monetary flexibility.
This is the reason why Mustapha Kamel Nabli called on Tunisian banks to support the ratings activity in order to develop the activity of this credit but also direct funding.
As such, the Governor noted that the development of the ratings business is dependent on developing the quality of information. “We cannot expect a development of ratings if there will not companies that provide quality information in terms of content and time.”
