BRICS nations on Sunday decided to establish an independent rating agency based on market-oriented principles saying it would further strengthen global governance architecture. Officials said that they were very optimistic about the prospects of a new rating agency.
The Goa declaration on Sunday said: “We welcome experts exploring the possibility of setting up an independent BRICS Rating Agency based on market-oriented principles, in order to further strengthen the global governance architecture.”
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“We believe that BRICS institution-building is critical to our shared vision of transforming the global financial architecture to one based on the principles of fairness and equity,” the declaration said.
“In order to further bridge the gap in the global financial architecture, we agreed to fast track the setting up of a BRICS Rating Agency,” Prime Minister Narendra Modi said in a statement at the conclusion of the BRICS Summit.
The BRICS countries have already set up New Development Bank, which became operational last year, to meet funding requirements of the members.
Advocating for a new credit rating agency backed by BRICS group, New Development Bank president KV Kamath had expressed concerns over methodologies of the big three global agencies saying that these are constraining growth in emerging nations.
Kamath had said despite having deep capital buffers, the ratings of multilateral banks like the BRICS-promoted NDB are affected due to the parent countries’ sovereign ratings.
Giving the example of NDB itself, which is planning to get itself rated for bond-raising in many countries, he had said its rating will be affected because the promoter countries are not AAA-rated.
“We need not constrain ourselves from our ability to do business … if this is the norm, I fear growth in the developing world will also be impacted,” Kamath had said.
Kamath’s comments followed concerns expressed by the BRICS group against the working of the rating market, currently controlled by the Big Three — S&P, Fitch and Moody’s — all based in the US.