BRICS Credit Rating Agency can change the dynamics of the global capital market. The global capital market is dominated by the top three credit rating agencies – S&P, Moody’s and Fitch. Emerging economies have had problems with Western credit rating agencies ‘politically biased’ decisions. The rating agency will further reduce the dependency of developing countries on the verdicts of the big three.
The bloc has grown at an increased rate over the past years. The grouping has successfully established a multilateral development bank, the New Development Bank (NDB) which has since its establishment in 2014 funded 27 projects in member states and has US$ 6.7 billion in lending amount.
India’s Economic Affairs Secretary, Subhash Chandra Garg during the first BRICS Finance Ministers and Central Bank Governors, in April 2018 urged members of the bloc to set up an independent rating agency of the five-member group. The BRICS rating agency was proposed during the 7th annual diplomatic Summit in the Russian city, Ufa in Bashkortostan. The proposal was affirmed during the 8th Summit in Xiamen.
Former Indian union commerce and home secretary G K Pillai had said earlier in 2012, that the control of intelligence in the world was biased and the bloc needed to set up its credit rating.
According to India having an independent agency would remedy impediments caused current and dominant rating agencies such as S&P, Moody’s and Fitch. These three western rating agencies hold over 90% of the sovereign rating market.
The BRICS Business Council Financial Services Working Group assessed the sustainability of establishing an independent credit rating agency in December 2016. In the global investor survey undertaken by the Russian chapter across 24 countries in 2016, 73% supported the idea of a BRICS Rating Agency, as reported by IOL.
Financial services company, Standard and Poor’s (S&P) has ascribed an ‘AA+’ long-term and ‘A-1+’ short-term issuer credit ratings on the New Development Bank (NDB) in 2018.
By: Kgothatso Nkanyane