Universal Credit Rating Group to Re-rate the World
Three rating agencies from Russia, China and the US are set to establish the Universal Credit Rating Group to reform the existing system dominated by the ‘Big Three’ – Moody’s Investors Service, Standard & Poor’s and Fitch Rating. Chinese Dagong Global Credit Rating Co Ltd will team up with the US ratings agency Egan-Jones Ratings Co and RusRating from Russia to launch the joint venture, called Universal Credit Rating Group (UCRG), on July 2. According to a press release from the group, UCRG will promote the reform of the international credit rating system and develop credit rating criteria. It will also disseminate impartial rating information around the world.
The joint venture will be different from its Western peers, while preserving the best practices in the credit rating market. Richard Hainsworth, the President of RusRating, says UCRG is seeking to complement the “Big Three”, not replace them. “We believe that a substantial problem in the system is the high degree of concentration – only three agencies have a global coverage. Moreover, each of these agencies is based in New York,” Hainsworth told The BRICS Post. Hainsworth says the existing regime creates cultural influence, which can affect the way in which companies in different countries are assessed. “So it is essential for the creation of a more balanced credit rating system … for there to be a new global rating agency based in a region of the world that is a net creditor to the global economy,” he added. UCRG will spend the next six to nine months laying the foundations for the rating standards and procedures and creating the models for ratings. The following 18 months will be spent on proving the concept. “After that the rating agency will begin a major roll out across the world,” Hainsworth said. He will be the UCRG’s chief executive officer and in charge of daily operations.The creation of new rating agencies falls in line with market demands for reform of the current existing system. The calls for change became particularly buoyant after the collapse of the Lehman Brothers, a global financial services firm which fell into bankruptcy after it was severely devalued by the Big 3 ratings agencies.
European and American politicians have repeatedly stressed the need for reform, while the growth of emerging economies also signifies a shift in of the balance. “Credit ratings are essential to the operation of a modern economy and the Big-3 agencies were crucial in the development of credit ratings,” Hainsworth says. “We are looking to complement the existing global rating agencies, not to replace them.”