Key Points
For the first time, leading banks have said they are willing to explore an arrangement for sharing some information on corporate defaults with rating companies...
At a meeting last week, officials of some of the large state-owned and private sector banks told CRAs that they are open to the idea and would await the agencies to suggest a format for sharing information, a person familiar with the discussion told ET...
This deepens the information asymmetry in the financial markets (between banks and CRAs); it also gives rise to divergence in ratings and commentaries on a company between two CRAs - with one firm catching a whiff of the default and factoring in the stress in its update on the borrower while another CRA remaining unaware of the development...
"Once banks agree to a certain format (on information sharing proposed by rating agencies), the industry body can nudge all banks to have a mechanism in place," said another person...
At the meeting, called to ensure that CRAs and banks engage more frequently and in a more structured manner, rating companies reminded banks about the large number of borrowers who still do not share data with CRAs..
