3 Why CariCRIS Caribbean –Small sized economies limiting local bond market development –Credit research in public domain relatively scarce –Sizeable regional economy –Increasing evidence of cross border financing –Conducive business & regulatory environment The Caribbean needs an integrated, regional debt market A regional credit rating services company is an essential ingredient
4 Rating agencies have provided opinions on creditworthiness of bond issuers for over 100 years. Provision of such credit information lubricates the working of bond markets. Impact of credit ratings on securities markets include: Issuer’s cost of capital Issuer's access to capital Structure of financial transactions Ability of fiduciaries and others to invest in particular investments Increased transparency and market pressure toward improved corporate governance on the part of issuers Role of Rating Agencies
5 Credit Rating - some fundamentals A credit rating is a current opinion on the relative creditworthiness of debt Ratings are: –Always relative –Within a defined frame of reference Ratings Frames of Reference can be: –Global –National –Regional
6 CariCRIS – Rating Products Regional Scale Ratings –Opinion on creditworthiness relative to other entities in a defined Caribbean region Foreign currency ratings Local currency ratings National Scale Ratings –Opinion on creditworthiness relative to other entities within a specific nation Local currency ratings
7 Illustration You want to compare …Use … ABC (T&T) Ltd US$ XYZ (J’ca) Ltd US$ Regional Scale Foreign Currency ABC (T&T) Ltd TT$ XYZ (J’ca) Ltd J$ Regional Scale Local Currency ABC (T&T) Ltd TT$ PQR (T&T) Ltd TT$ National Scale Local Currency
9 What is a credit rating ? What a rating is: A current opinion on the relative creditworthiness of debt An issue specific evaluation Aimed at differentiating credit quality A response to the market’s demand for information What a rating is not: Not an audit of the issuing company Not a one time assessment of creditworthiness of the issuer Not a general purpose certification of goodness of a company Not a recommendation to buy, hold or sell the rated security
10 What can be rated? Debt/Notional debt issued by: –Sovereigns –Manufacturing/ Service companies –Statutory Bodies/Public Sector Companies –Financial institutions & Banks –Finance Companies –Credit Unions –Holding Companies –Insurance Companies –Mutual Funds Such as: –Bonds –Bank Deposits –Commercial Paper –Term Loans –Preference shares –Secured debt –Unsecured debt –Mortgage backed securities –Asset backed securities –Structured obligations CariCRIS will primarily assign issue specific ratings.
11 Investors Eases risk identification and diversification Risk based pricing of Investments Greater depth of research, being locally based Issuers A proactive step towards transparency An independent, unbiased assessment Enhances credibility & acceptability Increases access to funding Encourages financial discipline Regulatory authorities Investor protection Market discipline Intermediaries Fixing coupon rates A second opinion Benefits of a CariCRIS rating
12 CariCRIS Rating Process Borrower/ Issuer Requests for a Rating Assigns analytical team, conducts preliminary research Document Preparation Collection of information from company Management Meetings Rating Committee assigns rating Communication/Discussion of rating with issuers by Rating Team Acceptance & Dissemination of rating/ publication Surveillance & Annual Review Rating Agency
Governance Structure OPERATIONS AUDIT & PROCESS QUALITY CONTROL CODE OF CONDUCT & BEST PRACTICES TRANSPARENCY OF CRITERIA Board of Directors Shareholders Rating Committee Management
14 Central Banks –Central Bank of T&T –Central Bank of Barbados –Eastern Caribbean Central Bank Commercial Banks –Capital & Credit Merchant Bank –Citibank T&T –First Caribbean International Bank –First Citizens Bank –Inter Commercial Bank –NCB Jamaica –RBTT Bank –Republic Bank –Scotiabank, T&T Mutual Funds/Unit Trust –Fortress Fund, Barbados –Unit Trust Corporation, T&T Insurance/Conglomerates –CL Financial –Guardian Holdings Limited –National Insurance Board, T&T –New India Assurance –Sagicor Life Inc Multilateral Agencies –Caribbean Development Bank –Inter-American Development Bank* Brokerage Houses –CMMB –JMMB Stock exchange –T&T Stock Exchange Technical Consultant –CRISIL * Formalities in process Participation By All Key Market Players
17 Fourth largest rating agency in the world with 17 years in market leadership position Strong relationship with Standard & Poor’s (S&P) Approx. US$ 100 billion of debt rated so far Helped set-up rating agencies in Israeli and Malaysia Technical Assistance from CRISIL
18 Core Values –Integrity –Independence –Analytical rigour –Team work Processes –Interactive rating process –Team & Committee approach –Local knowledge combined with global best practices –Strict confidentiality in handling client information Our Values & Processes
19 A Catalyst A rating agency’s role in a developing economy is much wider than in a developed one CariCRIS intends to play an important role in strengthening debt markets in the Caribbean Providing independent and credible benchmarking and valuation tools through credit ratings and risk management tools Engaging in policy level work with local governments, multilateral agencies, central banks, SEC, etc. in areas like infrastructure policy formulation, financial sector regulation Imparting credit risk and risk management training to the various constituents in the market place
20 Our Mission To contribute to the development of a vibrant, integrated Caribbean capital market by setting the highest standards of credible independent analysis and opinion to enable informed financial decisions.
THANK YOU Caribbean Information & Credit Rating Services Limited firstname.lastname@example.org / www.caricris.com Tel: (868) 627-8879 Fax: (868) 625-8871
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