InterAksyon.com means BUSINESS
MANILA, Philippines - The Philippine central bank chief said credit rating agencies should be more transparent about their methodologies to stay relevant amid growing public confusion on how the industry works.
"The main issue is simple but enormously important - how to create a unified credit ratings system acceptable and used by all countries and investors in the region as a way to make 'apples to apples' comparison,'' Governor Amando Tetangco Jr. of the Bangko Sentral ng Pilipinas (BSP) told participants of the 45th Annual Meeting of the Asian Development Bank Board of Governors.
"It is imperative that future work will include the careful education of investors and government alike and greater transparency in the thought processes and methodologies that are to be used to arrive at such ratings," he said.
Greater transparency will foster understanding and appreciation on the part of the public as ratings actions - whether an upgrade or downgrade - are often "least understood," the BSP chief said.
Grades assigned by rating agencies to countries or corporations reflect ability to pay debt, thus lowering or increasing borrowing costs as the case may be. Rating agencies have been at the receiving end of criticism for their failure to anticipate the global financial crisis of 2008-2009.
In the same forum, Philippine Finance Secretary Cesar Purisima said ratings should not veer far away from market sentiment, adding that, “methodologies must continue to adapt with the developments that are going around the market.”
Most underrated country
He said the Philippines, which two agencies rate two notches below investment grade, is "the most underrated country" in the world based on bond-implied ratings.
The Philippines obtained its highest credit rating from Fitch Ratings at BB+, one notch below investment grade, in June last year.
Standard & Poor’s Ratings Services and Moody’s Investors Service rate the country two steps below, but S&P awarded the country a “positive” outlook last December.
“The Philippines, compared to bond-implied ratings, is about four notches underrated. These are some aberrations that need to be considered because the Philippines is not unique in this position,” Purisima said.
"I'm very confident that we will get an upgrade," he however said.
InterAksyon.com means BUSINESS
BUSINESS NEWS
