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ARC rival to ratings big three

Thursday, January 16, 2014 - 02:17

Jan 16 - A new global ratings agency launches in London in a bid to break into the market, as the approach of the current 'big three' comes under increased scrutiny in the wake of the financial crisis. Ivor Bennett reports.

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And then there were four. These men see themselves as a new world order - launching a new global ratings agency to challenge the existing big three. Jose Esteves is the company's CEO. SOUNDBITE (English) JOSE ESTEVES, CEO, ARC RATINGS, SAYING: "The world economy changed, so the international financial system changed. and of course the rating industry has to change as well." They were the names that could take down a government. But since the financial crisis, the power of the big three has been increasingly scrutinised - questions raised over their method and impartiality. ARC's chief ratings officer Uwe Bott sees it as a way in. SOUNDBITE (English) UWE BOTT, CHIEF RATINGS OFFICER, ARC RATINGS, SAYING: "The governance failed certainly before 2008 in terms of the structured finance sector. But also, when you look beyond, the issues of the euro zone and the cyclical ratings that occurred, ever more weakening sovereigns rather than you know, being a true reflector of credit risk." That same approach saw Lehman Brothers bonds still rated as investment grade the very morning the bank collapsed. Instead, ARC says it'll adapt ratings as performances change, and overhaul the traditional scale, leaving out the junk. It's main selling point though is access, and in particular to emerging markets. The firm made up of 5 existing agencies from around the world - covering Brazil, South Africa, India and Malaysia. Boasting a combined client book of 6000 companies, the target is to break even within 5 years, and then challenge for the top spot. Mike Ingram from BGC Markets. (SOUNDBITE) (English) MIKE INGRAM, MARKET COMMENTATOR, BGC PARTNERS, SAYING: "I think more competition is always a good thing. I think the important thing is that a ratings agency once set up has to come out with authoritative analysis and reliable ratings. But yes, I've got to admit. I am personally somewhat troubled by the oligopoly that we have at the moment with the big three." One thing ARC can't compete with though is experience. Moody's was established as far back as 1909, while even youngest of the big three is now in its 90th year. And in a market built on reputation, that experience goes a long way.

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ARC rival to ratings big three

Thursday, January 16, 2014 - 02:17