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International credit rating agency ARC Ratings launches in London Print E-mail
Thursday, 16 January 2014

London, January 16, 2014 - Five credit rating agencies (CRAs) from Europe, Asia, Africa and Latin America have jointly created ARC Ratings S.A., a European and network-based CRA which aims to address the global markets’ need for a new approach to rating risk. Through its unique and innovative approach, ARC aims to empower investors to take better investment decisions and thus optimize the efficient allocation of global capital.

Independent from issuers and investors and free from any geographical or institutional bias, ARC’s corporate governance code and rating methodology are different from that of other established rating agencies and aims to avoid conflicts of interest in the rating process.

Global integration and technological advancement have led to a dynamically changing world which has fundamentally altered the way financial markets operate. The world economy has become multi-polar and highly interconnected. ARC aims to address these developments by offering an independent and multi-perspective approach and local expertise to the benefit of issuers and investors alike. ARC aims to rebuild trust and enhance reliability and transparency in the credit rating industry.

ARC combines its multi-presence and multi-perspective approach with local expertise: five experienced partners from four continents will work together in different contexts and with different challenges, using their individual experience to contribute to a new, open-minded and holistic rating process.

ARC will rate sovereign debt, financial institutions, non-financial corporations as well as structured products. Ratings will include those of mid-sized issuers, which have been largely pre-empted from access to capital markets in the past, but are of growing importance in a rapidly changing global environment.

Mid-sized companies are the backbone of many economies and need to diversify their funding sources and reduce their dependency on bank finance. Therefore there is a strong need for greater coverage of credit risk assessment for these companies. This will help the world economy and especially mid-size companies from non G8 countries to grow further.

ARC is introducing two innovative rating concepts:

o    Systemic Risk Rating (SRR) which allows for a holistic view of emerging risks integrated into all credit ratings and a
o    Financial Stability Rating (FSR) along the entire rating scale to serve as a rating ceiling in jurisdictions, where appropriate.

ARC will also introduce a reconfigured rating scale that does not distinguish between investment grade and non-investment grade but instead distinguishes between different levels of risk. ARC’s methodology will be dynamically adapted to keep pace with market needs.

ARC Ratings is registered with ESMA (European Securities and Markets Authority), complying with strict regulation standards.

José Poças Esteves, ARC Chief Executive Officer, said:

“The world has changed dramatically since the collapse of the U.S. sub-prime debt market in 2008 which triggered the credit crunch. ARC and its five founding partners believe that the old methods and approaches are no longer sufficient for the post-Lehman financial sector landscape.”

Uwe Bott, ARC Ratings’ Chief Ratings Officer, said:

“CRAs are supposed to be the safety nets of the financial markets. Their informational advantage is to provide the right judgment to protect investors and issuers alike. However, current methodologies are insufficient in capturing new information elements which will change the way risk is rated. Our approach adapts to a dynamically changing global environment, which requires constant re-invention of credit assessment.”

(Source - ARC Ratings Press Release)

 

 

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