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The Top 3 of the international rating agencies are facing an ambitious rival as China’s Dagong Global, U.S. Egan-Jones and Russia’s RusRating pool their expertise to form a new institution to assess performance of companies inside the BRICS group, says Bloomberg.
Universal Credit Rating Group (UCRG), as it is expected to be named, will offer independent and unbiased.
RusRating was set up in 2001, Dagong Global in 1994, Egan-Jones in 1995. Now compare them to the trio of the old school agencies – Standard & Poor’s was established in 1860, Moody’s in 1909, Fitch in 1913.
Egan-Jones and RusRating claim to be using business models that differ from those employed by the big three. Dagong became famous because it downgraded USA’s triple-A rating earlier than S&P, though the SEC refused to acknowledge the assessment.
The trio has increasingly come under fire from politicians from across the globe. The G20 financial stability council recommended the world leaders to decrease the impact of rating agencies over investment decisions. Politicians complain that by downgrading individual countries and financial institutions agencies are only piling up pressure during a time that has obviously turned into the worst recession since the Great Depression.
After S&P’s French downgrade error in November 2011, the European Commission tightened regulations.
Also, European politicians have repeated called for a new independent agency based in Europe, and idea echoed by Russia.
Mikhail Galkin, from VTB capital, says it would take a long time before the young institutions are able to offer real competition. Also, assessments by the big three have been embedded into many regulatory and financial documents so changes would need to be introduced for the markets to take account of emerging agencies.
Egan-Jones Ratings Bill Hassiepen told RBC Daily that the move is not aimed at a merger, rather the three companies are mulling a strategic alliance.
However, it looks more like a takeover, says CEO of the National Rating Agency Viktor Chetverikov. According to him, the Chinese company needs a subsidiary in Russia to bolster its influence in BRICS countries.
Dagong is the largest rating agency in South-Eastern Asia engaged in implementing aggressive expansion plans.
Author: Mikhail Vesely
