1. Caribbean Connect: High Level Symposium on CSME
The Role of Credit Rating Agencies in Developing Caribbean Corporate and Government Bond Markets
Caribbean Connect: High Level Symposium on CSME
Barbados: June 28-30, 2006
S.Venkat Raman
CEO & Chief Rating Officer
Caribbean Information & Credit Rating Services Limited

2. Presentation structure
Key elements of bond market development
The role of rating agencies
CariCRIS: A rating agency for the Caribbean
CariCRIS & CSME

3. What is a credit rating ? What a rating is: What a rating is not:
A current opinion on the relative creditworthiness of debt
An debt specific evaluation
Aimed at differentiating credit quality
A response to the market’s demand for information
What a rating is not:
Not an audit of the issuing company
Not a one time assessment of creditworthiness of the issuer
Not a general purpose certification of “goodness” of a company
Not a recommendation to buy, hold or sell the rated security

4. Key elements of bond market development
Issuer diversity
Investor diversity
Transparency and disclosure
Accounting standards – to give true financial picture
Corporate governance – for predictability of corporate action
Credit ratings – to provide a comparative framework
Independent regulator
Market infrastructure – brokers, exchanges, settlement systems etc.

5. Role Of Rating Agencies In Debt Market Development– At The Core
Creation of market for corporate credit and pricing of credit risk
Readily usable risk indicator
Tool for price-discovery, particularly for non-sovereign debt
Creating of a proper yield curve
Key information intermediary between issuers and investors
Reduce information asymmetry between investors and issuers
Facilitate comparison of investment options
Facilitate pricing of credit risk
Creation of secondary market in debt
Creates liquidity in bond portfolios
Leads to clarity in pricing of credit risk
Makes structured debt issuances easier
Building of financial awareness
Best practices for company analysis, risk assessment

6. Role Of Rating Agencies - At The System Level
Widen access to funding for smaller businesses
Compliments regulatory oversight
Prioritises regulators’ concern areas
Prudential practises predicated on ratings
Effective self-corrective tool for managements & businesses
Enhances trust and market confidence =>Expands savings pool

7. Role Of Rating Agencies - At The Application Level
Estimation of credit risk
Unbiased opinion arrived at through structured process
Publicly available information
Single, easily comprehensible grade
Basis for scientific risk management in banking sector
Better lending decisions, less NPAs going forward
Fundamental benchmarking for IRB (Basel) approaches
Better pricing of credit risk
Improved loan portfolios lend strength to the banking system
Basis for securitisation
Unlocking liquidity in loan and asset portfolios

8. Rating agencies: Role Vs Obligations
Independence : Real & perceived
Ownership
Governance architecture
Financial independence
Conformance to recognized codes of conduct
Transparency
Integrity in analytics & operations
Investment in market education & development

9. The Caribbean Perspective

10. The need for ratings in the Caribbean
Need for a vibrant bond market
Efficient financial intermediation and credit allocation
Alternate funding source to banks
Financial System Stability
Liquidity & financial crises management
Caribbean
Small sized economies limiting local bond market development
Businesses with appetite for funds and vice-versa
Credit research in public domain relatively scare
Sizeable regional economy
Increasing evidence of cross border financing
The Caribbean needs an integrated, regional debt market
A regional credit rating agency is a critical ingredient

11. CariCRIS
First Caribbean rating agency and world’s first regional credit rating agency
Launched in 2004/2005
Fruition of an idea long espoused by CARICOM
Promoted by regional Central Banks, CDB, IDB and other pan-regional institutions
Shareholding by CRISIL Ltd., the 4th largest rating agency in the world and a subsidiary of S&P.
Currently ratings being conducted in Barbados, Jamaica, OECS & T&T.

12. CSME and role of CariCRIS
Key Themes of CSME
Integration of Financial Markets
Seamless cross-border financial flows
CariCRIS role & benefits
Strengthen markets and facilitate unified regulation
Strong impetus to capital market development;
Energise the CSME initiative to create a unified debt markets
Strengthen financial systems through diversified markets
Investor Protection & better Market Discipline
Facilitating regional penetration of companies Increases transparency
Enhance credibility & independent profiling/risk analysis
Increased access to funding sources
Facilitating cross-border investment/lending
Enhanced ability to compare credits across the region
Reduces information risk and facilitates informed decisions

13. The Road Ahead The Beginning : has been WELL DONE
Rating Agency : needs to stick with its values and mission
Policy Makers & Regulators: Need to act further – to consciously build ratings into financial architecture
Investors & Issuers : The leaders need to show the way

14. info@caricris.com / www.caricris.com
THANK YOU
Caribbean Information & Credit Rating Services Limited /
Tel: (868)
Fax: (868)