BRICS to challenge rating giants

Policy lenders set to form alternative agency

Policy banks from the five BRICS countries are set to challenge international rating agencies’ market dominance as they appear to be approaching a decision to form a rating agency on their own.

The lenders from Brazil, Russia, India, China and South Africa inked a multilateral agreement to share ratings results on Saturday, ahead of the BRICS Summit in Xiamen, East China’s Fujian Province, which kicked off on Sunday, State broadcaster China Central Television (CCTV) reported.

The five government policy banks will also cooperate on currency and share credit ratings, which could break the dominance of the three well-known international rating agencies in the market, the CCTV report said, referring to Standard & Poor’s, Moody’s and Fitch Group.

The move gave fresh momentum to a long-proposed plan to establish a BRICS credit rating agency to provide an alternative to the Big Three, which, the countries believe, have given them unfair treatment.

Wang Lei, head of a research center for BRICS cooperation at Beijing Normal University said that the BRICS countries should build on the agreement for sharing credit ratings to establish a rating agency of their own, according to the Xinhua News Agency.

The BRICS countries agreed to fast-track the process for setting up a credit rating agency during a summit meeting in Goa, India in October 2016. Experts said the topic will likely get a lot of attention at the summit in Xiamen.

The BRICS policy lenders also signed a separate agreement on Saturday to work jointly in fending off exchange rate risks related to currencies from Western countries, according to the CCTV report.

Kundapur Vaman Kamath, president of the New Development Bank (NDB) formed by the BRICS countries, has called for the establishment of a BRICS rating agency, saying the Big Three are actually constraining growth in emerging countries.

Kamath said that last year even the NDB’s rating was affected because of the BRICS countries’ sovereign ratings.

“We do not need to constrain ourselves in our ability to do business... If this is the norm, I fear growth in the developing world will also be impacted,” he said at a forum in India, according to the Economic Times newspaper.