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| Friday, 21 March 2003 |
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Banks seek Fitch ratings By Chandani Jayatilleke Sri Lanka's banks are rallying to obtain ratings from Fitch Ratings Lanka Ltd. following the 2003 budget announcement that the credit rating and publication of such rating would be made mandatory for all deposit taking institutions and all debt issues over Rs. 100 million. CEO, Fitch Rating, Ravi Abeysuriya confirmed that the banks are in line to obtain ratings. "Credit ratings assist the public to find out the default of risk of their fixed income investments. The Government last year made an announcement in this regard," he said. The Government is hopeful that credit ratings would not only instil a greater degree of market discipline on financial institutions but also help bring down the lending rates in general through disintermediation, Abeysuriya said. In the absence of such mandatory, several financial institutions were reported to have mobilised deposits offering alluring interest rates. A rating system plays an important role in determining financial institution's (any other institution's) stability, so that depositors can decide where to save their money," Abeysuriya said. A Central Bank (CB) official said that the CB has informed the banks about this requirement at a bank managers' meeting, but an official circular has not been issued as yet. Meanwhile, the Central Bank is also monitoring the performance of a few banks which are reported to have run into financial troubles. Two banks have already submitted proposals outlining certain restructuring measures and the CB is working along with them, the official said. Referring to banks with negative financial figures, Abeysuriya said: "Such banks will have to improve the capital adequacy ratio by way of restructuring." A financial industry analyst said that the Pramuka Bank collapse wouldn't have happened if there was a mandatory system to obtain ratings. The premier savings institution in the country, the National Savings Bank obtained the SL AAA rating last week. SL AAA rating offers the highest safety for timely deposits. It is the highest rating assigned in Sri Lanka's national rating scale. Managing Director, Hatton National Bank, Rienzie Wijetilleke (HNB has been assigned SL A) said that the rating is a benchmark which assesses a bank's stability and credit exposure. "We need to have a rating to deal with foreign banks and organisations because they could rate the stability of the bank through the rating," he said. A credit rating is a carefully formed independent assessment of the ability to service the promised interest and principal obligations on a timely basis by an institution or debt issue. Credit ratings are not guarantees against loss. They are opinions about relative measures of default risk. Fitch Ratings yesterday confirmed the ratings assigned to the CitiBank Sri Lanka Branch SL AAA, National Savings Bank SL AAA, John Keells Holdings SL AA+, Commercial Bank SL AA+, Hayleys Ltd, SL AA+, DFCC Bank SL AA, Bank of Ceylon SL AA-, HNB SL A and Senkadagala Finance SL BBB. |
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