letters to the editor: the ratings debate

15 October 2004
Dear Sirs,
Dear Sirs,

Edmund O'Sullivan (MEED 24:9:04, Last Word) claims that the leading rating agencies are ignoring the Middle East. This is a surprising statement to Standard & Poor's (S&P)since we have been building up our coverage of the Middle East continuously over the last decade. We now rate five of the six GCC states (and a further six Middle East sovereigns), the most recent addition being Saudi Arabia in July 2003. We have increased the number of financial institutions that have been assigned a rating by 30 per cent in 2004 alone. During the past three years, the number of research reports published by S&P on the region has doubled, with specialised teams of analysts also compiling regional sector studies that support our active participation in conferences and panels. In all of these, we have explicitly acknowledged the major achievements by Middle East economies and governments in modernising their capital markets. S&P has also contributed to educating global investors in Islamic finance - standard in the Middle East but not so well understood outside the region. We have assigned ratings to the most prominent and groundbreaking sukuk issues, to the Islamic Development Bank and to several other Gulf-based Islamic financial institutions. On the matter of payment for ratings, S&P is very aware that loss of reputation and independence is a far greater risk than the financial worth of a rating assignment. We assiduously check the performance of our ratings with default rates to ensure consistency in our conclusions. And as the demand for ratings increases from more corporate borrowers, as they overcome their reluctance to access debt capital markets, we will apply our established techniques to these sectors too.

Guy Hewitt

Managing director, credit market servicesStandard & Poor'sLondon

Dear Sir,

I read the Last Word in MEED 24:9:04 and would like to correct your comment regarding the lack of interest shown in the region by the two leading rating agencies ( Moody's Investors Service and Standard & Poor's). Recognising the potential that exists in the region, Middle East Rating & Investors Service (MERIS)was established in 2003 as a joint venture between Finance & Banking Consultants International (FinBi), the local partner in Egypt, and Moody's to provide rating services in Egypt and other countries in the region. As an affiliate of Moody's, MERIS receives the technical support and expertise of Moody's as well as having access to its wealth of information and database. We pride ourselves as being one of the pioneering local/international rating agencies in the region. As such, I would like to set the record straight by emphasising the existence of a rating agency that is combining the local expertise of the region with the know-how of one of the two leading rating agencies worldwide.

Youssra Aboul Enein

Senior risk rating officerMERIS, Egypt

Dear Sir,

I read the Last Word in MEED 24:9:04 on the need for establishing a rating agency in the Middle East and particularly located in Dubai. You are definitely correct in your proposals. Thank you for thinking of such an idea at this particular time, with the state of affairs as it is now in the Middle East. However positive a rating agency may be, unfortunately the surrounding environment definitely has a subjective impact on the positiveness of the rater. So there is a genuine need for establishing a viable, reliable and honest rating agency dedicated to the needs, aspirations and true assessment of commercial banking and industrial enterprises without any taint of prejudice.

Dr Ahmed Ali Al Hamdani

Chairman, Watani Bank for Trade & InvestmentYemen

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