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01 December 2019

Turkey acquires JCR Eurasia to form national rating firm

Turkish politicians have long complained about what they perceive as unfair treatment by global rating firms Moody’s, Fitch Ratings and S&P Global, all of which rate the country junk.

Bloomberg/Ismail Ferdous

by Kudakwashe Muzoriwa

Turkey is buying a credit-ratings firm that will assess the nation’s companies, a move that may support the government’s efforts to spur more bank lending, according to local newswire Anadolu Agency.

Financial institutions in the country acquired 85.1 per cent of JCR Eurasia Rating, the local unit of Japan Credit Rating Agency, creating a national firm that will appraise the creditworthiness of businesses seeking to borrow.

The government plans to push new regulations through the banking watchdog that will allow lenders to use the ratings when calculating their capital adequacy ratios. Should the ratings of borrowers improve, it will mean banks can set aside less capital as provisions, giving them more room on their balance sheets.

Berat Albayrak, the Turkish Treasury and Finance Minister, said, “This initiative will assess the creditworthiness of the private sector promptly and correctly.”

“It will lead to more efficient use of resources and support healthy economic growth,” said Albayrak.

President Recep Tayyip Erdogan’s administration is trying to get banks lend more in an effort to reignite an economy struggling to recover from a recession. The regulator has already eased and clarified rules on how to treat souring loans to give banks more space to lend.

The government wants to make it mandatory for large companies to use the national rating company, which will cascade down to smaller firms in time. The rating company will not assess sovereign debt or banks.

Treasury and Finance Minister Berat Albayrak in April 2019 said a national credit rating firm would be established this year.

The country is forming its own credit-ratings company after Chinese regulators earlier this month gave approval for Dagong Global Credit Rating, one of China’s largest domestic ratings firm, to resume its assessments. The firm was banned last year from assessing bonds after giving fake information and follows repeated warnings from authorites for issues including lack of due dilligence and incorrect reports.

The Banks Association of Turkey said that Borsa Istanbul will own an 18.5 per cent stake in the new ratings company, followed by six per cent each for the Association of Financial Institutions, Turkish Capital Markets Association and Insurance Association of Turkey.

Japan Credit Rating Agency will retain 14.95 per cent and 17 banks will each own 2.86 per cent stakes. The average capital adequacy ratio of the banking sector stood at 18 per cent in October 2019.

RELATED STORIES: Banks Association of Turkey Borsa Istanbul Rating Agency Insurance Association of Turkey Turkish Capital Markets Association Berat Albayrak JCR Eurasia Rating





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