Wednesday, January 22, 2014
RAM ratings is now locally owned, with Bank financing! Will you trust them?
The Ratings organization RAM, the others being the likes of Fitch and Moody’s are used by companies to get a rating that is recognized by those who use them for purposes such as evaluating a company’s credibility, especially when it comes to doing business with them and in the case of banks and other lenders, when it comes to provision of working capital and loans.
The ownership of RAM has just changed, where the owner from Malaysia, has disposed of it to the local management! That in itself should raise alarm bells on the credibility of the issue of any reports by them.
Secondly, I would question the role of banks to finance such a management buyout as that is what it seems to be to have happened. I believe there MUST be clear separation of ownership from management of a rating agency. Otherwise, unorthodox and questionable ratings can be given to clients of RAM, and don’t forget, the payment (sometimes quite hefty) is made by the company that is receiving a rating in the first place, another cause for major concern, when the agency’s credibility is called to question! This is normal practice in the industry.
For the good of the Agency, I would say that the financing partners insist that a credible independent Board own the Agency for it to retain an element of credibility that will ensure its financial longevity, and another completely independent set of managers run it on sound principles of evaluating companies that come to it to be rated. Integrity, integrity and integrity of the owners!
While it is admirable to have a wholly locally owned agency, it must start with credibility and seen to be credible, otherwise no amount of PR is going to change facts. The principals of this initiative MUST look in the mirror and ask themselves, what their track record is and the credibility that they bring to the table.
They must honestly ask that question, as otherwise like this Government whose only credibility is electoral, to continue in power for ever, but it is limited to that. No one in their right minds, except loan sharks like China’s Exim Bank, would lend to them, as they have no intention of repaying their loans, except to re finance them at ever higher rates of interest, taking the Country down the precipice or the proverbial greasy pole to its destruction.