Advantages of ARC's Ratings

Rating

A rating is an independent and forward-looking opinion of the ability and willingness of an entity to make all required payments on a given obligation in a timely manner. 



It's an opinion:
- Prospective
- Independent and neutral
- Grounded, with access to confidential information
- Rigorous, systematic, continuous and timely
- Ultra synthetic and comparable between issuers
 

Strengths of ARC Ratings' Ratings

In forming its opinion, ARC Ratings analyses all necessary, public and confidential, information in a rigorous, systematic, dynamic and timely manner.

 

A rating is a fundamental tool to increase market efficiency by reducing the information asymmetries between issuers and investors leading to:

Financial cost optimisation, because rating:

  • Potentially reduces the risk premium or  collateral demanded by investors through a better understanding of the risk of a given obligation
  • May be accepted by lenders as a substitute for bank guarantees or reduce the costs of such guarantees for the borrower
  • Provides an important tool for negotiating with banks
  • May reduce the capital reserve requirements set aside for lending activities by banks using the standardised, or external rating based, approach under Basel II and Basel III
  • Facilitates obtaining credit from suppliers and increases credibility with customers


Greater facility in placing debt, because a rating:

  • Facilitates debt disintermediation
  • May broaden the universe of potential investors:
    • Allows access to external markets
    • May allow investors to purchase instruments that fall within certain minimum statutory rating requirements
  • Allows an issuer to distinguish itself from its peers and from its country of residence in terms of risk


Rating assessment may help issuers to address identified weaknesses:

  • During the rating process a strategic analysis of the issuer’s risks is made and weaknesses are detected, allowing management to take corrective action
  • Increases issuers’ transparency


More efficient allocation of global capital, because a rating:

  • Gives investors access to better information, thus allowing comparison between different issuers / issues
  • Allows for economies of scale in credit risk analysis due to rating agency’s specialisation

ARC Ratings differentiates itself by applying a multi-perspective, local expertise and network-based approach to the business of assigning credit ratings.

 

The application of this new approach is based on the pooling of resources, specialised skills-sets and cultural diversity of ARC Ratings and its founding domestic credit rating agencies, translated into a balanced partnership - Our ARC of Partners. This Arc of Partners works as a network that, together with robust governance rules, optimises ARC Ratings' quality of ratings. 

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