In a statement issued late today, it said that apart from acquiring a stake in a rating agency, applications can also be made to establish and register a new rating agency, subject to the requirement stated in the Credit Rating Agency (CRA) Guidelines.
“Shareholders of rating agencies can be companies, including public listed companies, in line with similar practices in other jurisdictions,” it said.
The SC was commenting on recent reports on changes in the shareholding at RAM Holdings Bhd.
FMT had, in an editorial on Wednesday, questioned the decision of the SC to approve an application by CTOS Digital Bhd to acquire a more than 51% stake in RAM Holdings.
In its statement this evening, the SC stressed that being independent and objective are essential in a credit rating agency’s credit assessment process and rating decisions.
These objectives should never be compromised, it stressed.
It said that to ensure such objectives are achieved, its CRA Guidelines have set out the obligations that a credit rating agency must continuously comply with.
It added that these agencies are also required to establish a rating committee whose members must be experienced, qualified and independent.
“This is to assign and decide on all credit ratings to prevent board and shareholders’ involvement in rating discussions and decisions,” it said.
The SC said it would continue to take pro-active measures to strengthen rating independence and objectivity and, where required, impose additional conditions.
“Going forward, the SC intends to make it a requirement for the majority of the board members (at both the holding and rating companies) as well as the rating committee to be independent, and for any decision to provide dividends to shareholders to require the SC’s prior approval so as to ensure that the CRA continues to operate with sufficient resources to sustain its ratings operations,” it said.
The SC also clarified that any change in the shareholding that results in one party controlling 20% or more of the paid-up capital of a rating agency would require its approval.
However, it said, it would consider the value proposition vis-a-vis the increasing competitive environment that rating agencies face when evaluating such applications.
“These include product expansion, business growth and sustainability, regional collaboration, enhancement of skills sets and overall contribution to the development of the local credit rating industry and the Malaysian bond market,” it said in the statement.
The SC also pointed out that it has given approval to more than one applicant to hold more than 20% shareholding in a ratings agency.