Central Bank may re- examine finance company ratings by LRA
The Central Bank (CB) is considering re-examining all the ratings done on finance companies by crisis-hit Lanka Ratings Agency (LRA), following the latter’s rating suspension by the Securities and Exchange Commission (SEC) and its withdrawal of the EAP Broadcasting Company Ltd rating, CB sources said.
“Over 30 finance companies were rated by LRA out of the 45 that are licensed by CB. We want to find out the details of these ratings,” a CB official told the Business Times. The CB sprang into action after the SEC restrained LRA from providing new ratings with effect from 25th March and directed LRA to comply with laid-down rules such as certain documentation pertaining to an agreement on collaboration with an international credit agency or on LRA employing experts on credit rating internationally, according to the official.
The SEC said there was a conflict of interest with some directors of LRA being part of EAP and raised questions about the rating process. Defending its position, LRA said in an announcement that the rating committee members who rated EAP last year did not have any association whatsoever with the EAP Broadcasting.
The official added that the CB in a letter to the SEC has requested reasons for LRA’s suspension and whether ratings done by the agency in the past aren’t valid.
SEC sources said that all ratings prior to March 25 stands but that LRA’s licence is coming up for renewal by this month end and if they can’t furnish the requested documentation by then the regulator won’t renew the licence.