Big three agencies win RB approval

In a release yesterday, the Reserve Bank approved the three well-known international agencies to provide the ratings, which will become necessary for non-bank deposit takers (NBDT), including finance companies, from March 1, 2010.

The Reserve Bank has proposed that the mandatory ratings will cover the issuer rather than individual debt issues with a long-term and local currency focus.

In a paper published this month, legal firm Kensington Swan says the proposal to require ratings of the issuer was “adopted on the basis that rating agencies, when establishing an issuer's rating, generally take into account its relationship with its guaranteeing subsidiaries and related parties”.

“In setting out its preferred approach the Reserve Bank has stated that flexibility should be maintained to enable deposit takers to use credit ratings other than those prescribed in the regulations, according to their business needs,” the Kensington Swan paper says. “However, it is proposed those ratings should be used in addition to a local currency, long term, issuer rating which would be prescribed by the regulations.”