US ratings agency Thomson Bankwatch is to start issuing ratings for leading banks in the Gulf Arab states, possibly followed by banks in Egypt and Jordan, a senior company official said.
‘We’re hopeful that in the next month we’ll have some ratings,’ said Thomson senior executive vice-president Fred Puorro. ‘We want to have eight to nine countries in the Mediterranean and Gulf area.’ He said Thomson, which has offices in New York, London, Cyprus and Hong Kong, has 1,700 clients in 50 countries. The agency takes fees from subscribers for the use of its information rather than charging institutions for their ratings. It will start with top banks in each Gulf state though other banks could also ask to be rated. Assessments will compare the performance of banks within each country and across the region and contrast them with other parts of the developing world.
Banks and companies usually seek ratings when they need to borrow on the capital markets. ‘In the Gulf they have enough capital within the system, but Gulf banks have a significant reliance on the interbank market,’ Puorro said. ‘To expand or in some cases even to maintain credit lines, a rating is becoming more important.’ Thomson will assign banks what it calls an issuer rating, which assesses the overall performance and risk of the issuer rather than specific issues of bonds or short-term notes.
Puorro said Thomson put emphasis on building up relationships with banks and winning their co-operation in the rating process.
‘Gulf banks place a high value on relationships and reciprocity. Many have a good story to tell. In many cases they want to tell it.’ US competitor Moody’s Investors Services has already rated four banks in the UAE and two in Bahrain (see Feature) while Standard & Poor’s (S&P) says it plans to bring out analyses of individual banks, which will full short of being an actual rating.