The BRICS Rating Agency can usher in a new paradigm in the credit rating industry, placing greater emphasis on the specific aspects of emerging economies.
The global financial landscape is going through a moment of significant change with the announcement of the BRICS Rating Agency.
This initiative represents a bold step by the BRICS countries - Brazil, Russia, India, China, and South Africa - who have joined together to create an independent credit rating agency to provide an alternative and balanced perspective on the risks and creditworthiness of governments, financial institutions and companies in emerging markets.
The announcement of this initiative came in the context of the unprecedented expansion of the BRICS, which invited six new members - Argentina, Egypt, Ethiopia, Saudi Arabia, the United Arab Emirates, and Iran - to join the alliance. This expansion reflects the growing economic and geopolitical significance of the countries involved, which now account for a significant share of the world’s population and global GDP in terms of purchasing power parity.
The main objective of the BRICS is to provide reliable and unbiased credit ratings for member countries and for financial institutions and companies operating in their markets. This aims to ensure greater transparency and trust in the financial system of emerging countries, allowing them to access international financing on more favorable terms.
The creation of this agency represents a reaction to concerns about traditional rating agencies, which have often been criticized for alleged bias and conflicts of interest. Analysts argue that the BRICS Rating Agency can introduce a new paradigm in the credit rating industry, placing greater emphasis on the specific aspects of emerging economies and more accurately assessing the risks and opportunities they offer.
The commercial currency previously discussed by the BRICS could play a vital role in the operation of the rating agency. The use of national currencies for valuations could allow for a more realistic assessment of financial strength and risk exposure, considering the specificities of the economies involved. This innovation could lead to a greater balance in valuation global credit and reduce the dependence on valuations expressed in a single currency, such as the US dollar.
The effect on the global economy could be significant. The emergence of an alternative rating agency could reduce reliance on ratings issued by traditional agencies and could push the latter to improve their practices. Furthermore, the attention focused on emerging markets could increase access to credit for these economies, favoring their growth and sustainable development.
It is important to underline that the BRICS Rating Agency does not aim to replace the existing rating agencies, but rather to offer an alternative that takes into account the peculiarities of emerging economies. This initiative represents a further step towards the diversification and democratization of the global financial landscape, allowing BRICS countries and their partners to express their opinions and assessments independently.
The success of this initiative will depend on its integrity, transparency, and independence. It is crucial that the BRICS Rating Agency maintains high credit rating standards, avoiding any political influence or external pressure. Only through adherence to these fundamental principles can the agency earn the trust of global markets and become an authoritative voice in the world of credit ratings.
“Today”, said Sergey Storchak, Russian Deputy Minister of Finance, “there are all prerequisites for resuming active discussions on the creation of the BRICS rating agency (…) If we make an effort to expand the use of national currencies, it makes sense to form a BRICS rating agency that will issue ratings in local currencies,” Storchak said.
Original article published on Money.it Italy 2023-09-01 08:15:00. Original title: Come funziona la nuova agenzia di rating dei Brics?
