The use of credit rating have become increasingly more essential for the securities markets in recent years, also with respect to regulations of the financial sector. Rating is usually an independent evaluation of the credit risk of an issuer of bonds, where the credit risk is valued on a predefined scale. The rating is set by a rating agency, of which the best known are the three major international rating agencies (S & P, Moodys and Fitch). However, in recent years several local rating agencies have been established in Europe.
In the Nordic countries generally only the larger companies and financial institutions have been rated, while smaller enterprises have been so-called "shadow rated" by investment banks, without these being licensed as independent rating agencies. Similar to ratings from the major rating agencies shadow ratings have used a graduated scale.
The European Union's surveillance authority for the securities market, ESMA, has announced that the system of shadow ratings should cease because such activities may only be operated with the necessary ESMA license. On this background, most investment banks in the Nordic region have discontinued their publication of shadow ratings. Shadow ratings neither meets the conditions set for ratings related to capital and solvency requirements for financial institutions.
The present situation has created a demand for a local rating alternative for Nordic companies and financial institutions being too small to be rated by the international rating agencies. Creation of a Nordic rating agency has been discussed for several years. Nordic bond issuers may through a Nordic agency obtain an approved rating in an easier and less expensive way, based on a process better adapted to the Nordic business environment. This especially applies for smaller and medium-sized issuers in the Nordic markets, who also have ambitions over time to approach the international financial markets outside the Nordics. Rating is also of significance to investors using credit rating as a guide for monitoring desired level of risk in their investment portfolios.
As a key player in the Nordic bond market Nordic Trustee ASA has been requested by a number of market participants to assume a leading role in establishing a Nordic rating agency. Nordic Trustee has on this background been in contact with major Nordic financial institutions and institutional investors and, based on their feedback, decided to proceed with the project. A Nordic rating agency will contribute to a more efficient market and ensure a strong platform for further development of the Nordic bond market.
Nordic Trustee have founded the company Nordic Credit Rating AS and the ambition going forward is to raise NOK 50 million in a capital increase through a diverse ownership structure where no shareholder, for regulatory reasons, will own more than 5 % of the company. As soon as the necessary capital is in place the application process will start in order to obtain a license from ESMA as a rating agency ("CRA" - Credit Rating Agency). If the establishment of the company proceeds as planned, it is expected that Nordic Credit Rating will offer approved rating services in the first half of 2018.
Subsequent to the capital increase, Nordic Trustee will transfer the responsibility of operations and development of Nordic Credit Rating to the company's new board. Nordic Trustee will continue as a minority shareholder in line with the other owners of the company.
For further information, please contact:
M +47 92 82 19 98