BSEC plans Tk10,000 minimum credit rating fee
Rules amendment draft allows dual or multiple ratings by different agencies
The minimum fee for credit rating services will be Tk10,000, according to a draft amendment to the Bangladesh Securities and Exchange Commission (Credit Rating Companies) Rules, 2022.
Officials at the commission believe the fee floor will help improve the quality of credit ratings in the country by supporting professionalism.
The Bangladesh Securities and Exchange Commission (BSEC) on Monday invited public opinions on the proposed changes, with a deadline of 24 July, to create a better credit rating ecosystem.
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The draft allows a firm to appoint more than one credit rating agency at a time to assess its creditworthiness.
Currently, the rules prohibit credit rating companies from signing agreements with a client on the same issue or for dual rating on the same issue unless the client terminates its contract with the existing credit rating provider.
Once the draft amendment is finalised, a firm must disclose each of its credit ratings from different agencies, regardless of their outcomes.
If dual ratings are conducted for regulatory purposes, the firm must submit each report to the regulator, which will consider the lower rating, a practice also suggested by BASEL norms for central banks.
If there are more than two ratings, the regulator will consider the one awarded by the majority of rating agencies. The regulatory authority may ask each rating provider to explain discrepancies in ratings that differ by two notches.
Additionally, firms must inform each appointed rating company about any dual or multiple rating agreements.
If a credit rating is upgraded by two notches, the agency must report the reasons for such an upgrade with rationale to the BSEC.
To prevent aggressive marketing by agencies or rating shopping by firms, the planned amendment aims to prohibit agreements before terminating the contract with the existing rating provider, unless the contract is being signed for dual or multiple ratings.
Credit ratings reflect the financial strength of an entity or instrument to repay lenders, and lenders and investors worldwide rely on them to assess risks and expected rewards.
In Bangladesh, lending rates are not heavily dependent on official credit ratings due to longstanding concerns about the reliability of ratings, similar to issues with audited financial statements.
However, the regulator is actively working on reforms aimed at advancing financial markets by addressing crucial factors such as disclosures, corporate governance, accounting, auditing practices, and professional ratings.
