31st Annual. CAIB Conference. Saint Lucia. November 16, 200

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31st Annual CAIB ConferenceSaint Lucia
November 16, 2004
A Rating Scheme for the Caribbean

How raters assess Banks
S. Venkat Raman CEO Chief Rating Officer Carib
bean Information Credit Rating Services Limited
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The bond market imperative CariCRIS

• Need for a vibrant bond market
• Efficient financial intermediation and credit
  allocation
  
• Alternate funding source to banks
• Liquidity financial crises management
• Caribbean
• Small sized economies limiting local bond market
  development
  
• Credit research in public domain relatively scare
  
  
• Sizeable regional economy ?
• Increasing evidence of cross border financing ?
• Existing Global Scale Ratings
• Low penetration
• Bunching
• A regional rating services company
• Relevant credit comparison for investors in the
  region
  
• A more granular assessment of credit risk

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CariCRIS Business Ready

• Company formation
• Initial equity offering completed successfully ?
• Broad-based regional ownership ?
• Organisation
• Analysts recruited trained
• Rating Committee in place
• CRISIL Resident technical consultant

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Participation By All Key Market Players

• Central Banks
• Central Bank of TT
• Central Bank of Barbados
• Eastern Caribbean Central Bank
• Commercial Banks
• Capital Credit Merchant Bank
• Citibank TT
• First Caribbean International Bank
• First Citizens Bank
• Inter Commercial Bank
• NCB Jamaica
• RBTT Bank
• Republic Bank
• Scotiabank, TT
• Mutual Funds/Unit Trust
• Fortress Fund, Barbados
• Unit Trust Corporation, TT

• Insurance/Conglomerates
• CL Financial
• Guardian Holdings Limited
• National Insurance Board, TT
• New India Assurance
• Sagicor Life Inc
• Multilateral Agencies
• Caribbean Development Bank
• Inter-American Development Bank
• Brokerage Houses
• CMMB
• JMMB
• Stock exchange
• TT Stock Exchange
• Technical Consultant
• CRISIL
• Formalities in progress

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Rating Scheme for the Caribbean - Some
fundamentals

• A Credit rating is a current opinion on the
  relative creditworthiness of debt
  
• Ratings are
• Always relative
• Within a defined frame of reference
• Ratings Frames of Reference can be
• Global
• National
• Regional
• The Caribbean can truly lead the world with
  CariCRIS

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CariCRIS Ratings Products

• Regional Scale Ratings
• Opinion on creditworthiness relative to other
  entities in a defined Caribbean region
  
• Foreign currency ratings
• Local currency ratings
• National Scale Ratings
• Opinion on creditworthiness relative to other
  entities within a specific nation
  
• Local currency ratings

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Illustration
You want to compare
Use
ABC (Jca) Ltd
XYZ (St.Lucia) Ltd
Regional ScaleForeign Currency
US
US
ABC (Jca) Ltd
XYZ (St.Lucia) Ltd
Regional ScaleLocal Currency
J
EC
ABC (Jca) Ltd
PQR (Jca) Ltd
National ScaleLocal Currency
J
J
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CariCRIS Rating Scale
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Governance Structure
Shareholders
Board of Directors
Rating Committee
Management
OPERATIONS AUDIT PROCESS QUALITY CONTROL
CODE OF CONDUCT BEST PRACTICES
TRANSPARENCY OF CRITERIA
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What can be rated?

• Debt/Notional debt issued by
• Sovereigns
• Financial institutions Banks
• Manufacturing/ Service companies
• Statutory Bodies/Public Sector Companies
• Finance Companies
• Credit Unions
• Holding Companies
• Insurance Companies
• Mutual Funds

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How Raters assess Banks Financial Institutions
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CariCRIS assessment framework for banks FIs
The CRAMEL framework
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CARICRIS ASSESSMENT FRAMEWORK FOR BANKS FIs
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Benefits of a CariCRIS rating

• Issuers
• A proactive step towards transparency
• An independent, unbiased assessment
• Enhances credibility acceptability
• Increases access to funding
• Encourages financial discipline
• Investors
• Eases risk identification and diversification
• Risk based pricing of investments
• Greater depth of research, being locally based
• Regulatory authorities
• Investor protection
• Market discipline
• Intermediaries
• Fixing coupon rates
• A second opinion

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Technical Assistance from CRISIL

• Fourth largest rating agency in the world with 17
  years in market leadership position
  
• Largest in Asia any emerging market
• Strong relationship with Standard Poors (SP)
• Approx. US 100 billion of debt rated so far
• Helped set-up rating agencies in Israeli and
  Malaysia
  
• Strong practice in Basel-II compliant risk
  management systems training - for credit,
  market operational risk

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Our Values Processes

• Core Values
• Integrity
• Independence
• Analytical rigour
• Team work
• Processes
• Interactive rating process
• Team Committee approach
• Local knowledge combined with global best
  practices
  
• Strict confidentiality in handling client
  information

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A Catalyst

• A rating agencys role in a developing economy is
  much wider than in a developed one

CariCRIS intends to play an important role in str
engthening debt markets in the Caribbean
Providing independent and credible benchmarking
and valuation tools through credit ratings and
risk management tools
Engaging in policy level work with local
governments, multilateral agencies, central
banks, SEC, etc. in areas like infrastructure
policy formulation, financial sector regulation
Imparting credit risk and risk management
training to the various constituents in the
market place

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Our Mission

• To contribute to the development of a vibrant,
  integrated Caribbean capital market by setting
  the highest standards of credible independent
  analysis and opinion to enable informed financial
  decisions.

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THANK YOU

• Caribbean Information Credit Rating Services
  Limited
  
• info_at_caricris.com / www.caricris.com
• Tel [phone]
• Fax [phone]