КурсивЪ, 2009-05-21

Investors benefit from international rating agencies downgrading Kazakh banks, suggests President of GlobalRating Richard Hainsworth defending higher KzRating ratings. However, internal ratings have not affected the domestic market adequately so far.

GlobalRating’s official publication says that a wide use of credit default swaps (CDS) is an additional factor in default negotiations. Investors hedging debt with long CDS positions will be able to benefit in case of default. Creditors with long CDS positions and early debt repayment options may be interested in making these calls in crisis conditions and thus increasing the probability of default.

As a result, the relation among CDS’s ratings and creditors’ behavior is closely interconnected if ratings evaluate the probability of default. Growth in CDS will bring a higher number of defaults. “This interconnection feeds into negotiations among investment bankers and rating agencies,” notes Richard Hainsworth.

Representatives of BTA bank share this opinion. The bank, according to GlobalRating, was the first one to experience the pressure of international rating agencies.

There are many historic examples when agencies made questionable decisions about borrowers’ credit, so their latest decisions about Kazcommercebank and Narodny Bank, especially Fitch’s position, are surprising, commented BTA Analytics expert Bayurzhan Bizhanov.

He shared his opinion despite these banks’ far from ideal conditions. Still, he thinks there was no reason for such a radical rating change, especially since it may trigger covenants and margin calls, as investors demand early debt repayment.

He noted that despite the negative effects of the ratings, it is difficult to argue against the ratings’ subjective evaluations.

If a bank gets a very low rating, it can dispute the ratings but it is ineffective. Banks can also react by cancelling ratings and not working with the agencies, but this would affect their future ability to enter the international stock and bond markets.

On the other hand it is difficult to prove that the agencies and investors are negotiating, since the ratings are often assigned post factum. The same story occurred with BTA: first it announced its inability to pay off external debts, and then its rating was lowered. Overall, ratings are not of prime importance for investors. The trust towards them is low and many analysts do not rely on Kazakh ratings.

“Using international ratings domestically is a wrong trend and the crisis proved it. Our own rating scale should be used,” Chairman of the Board of Tsesnabank, Dauren Zhaksybek, told Къ. “There is a coordinated international rating scale but it is designed for international investors and is often not appropriate for domestic needs,” he said.

At any rate domestic rating agencies do not have a lot of influence over business and expert opinions. No matter what rating they assign, it is not important, said BTA Analytics expert. Kazakhstan’s dependence on external investments and capital make ratings of large rating agencies a priority while the lack of a domestic rating market make local rating agencies “decorative.”

Marina Gazizova