International

Talks over a BRICS rating agency

Demand for a parallel rating agency has escalated after Western agencies downgraded Russia's rating

After successful moves to form the Asian Infrastructure Investment Bank (AIIB), China, along with experts from the Brazil, Russia, India and South Africa, is holding talks to form a BRICS rating agency that will break the monopoly of the Big Three — Fitch, Moody’s and Standard & Poor’s.

Russia’s Sputnik, its own agency, quoted Russian Sous-Sherpa for BRICS, Vadim Lukov, as saying that China’s Dagong rating agency and the Russians are at the heart of the talks for creating a new independent agency.

The demand for a parallel rating agency escalated after Western agencies downgraded the creditworthiness of Moscow following the crisis in Ukraine.

Xinhua news agency quoted Guan Jianzhong, the president of Dagong, as saying that the lowering of Russia’s credit ratings by three Western rating agencies was politically motivated.

Mr. Guan said that while arriving at a country’s credit rating, the U.S.-based rating agencies applied the criteria of political system, per capita GDP, independence of a country’s central bank, economic system and the level of market privatisation, as well as the right to issue international currency reserves.

“They are all ideological criteria and have nothing to do with a central government’s ability to generate revenues and its ability to repay debts. If one uses these standards to assess credit risks of the United States, one may come to the conclusion that the U.S. economy would never default, because they can repay their debts by printing more money. It is obvious that these criteria are unfair,” said the president of Dagong.

Mr. Lukov pointed out that the Big Three have also published negative 2015 outlook for Mercosur countries — a sub-regional economic bloc comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela alongside associate countries Bolivia, Chile, Colombia, Ecuador and Peru.

The Financial Times had earlier reported that BRICS countries have long deliberated on plans to establish their own rating agency, along with the formation of the new development bank.

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Printable version | Jun 7, 2020 2:51:55 PM | https://www.thehindu.com/news/international/talks-over-a-brics-rating-agency-that-will-break-the-monopoly-of-big-three/article7068513.ece

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