Search

Search form

Logo of Phnom Penh Post newspaper Phnom Penh Post - Ratings bodies should be independent

Ratings bodies should be independent

Ratings bodies should be independent

Dear Editor,

100505_16
Photo by: AFP

The Phnom Penh Post reported that Asian markets were suffering from the latest crisis in the euro zone (“Asia stocks hit hard by Spanish downgrade”, April 30).

If present plans come to fruition, there will be a Cambodian stock market by January 2011 and, consequently, we may anticipate that it will be included in the list of exchanges suffering losses in similar situations in future.

The financial debacle of 2007-2008 underscored the fact that when stock markets fall, for whatever reason, the knock-on effects can be drastic even to those far removed from major financial hubs.

The latest volatility was prompted by a downgrading of Spanish sovereign debt made by Standard & Poor’s, one of the world’s pre-eminent rating agencies.

Major investors, from pension funds to investment trusts, still set great store in assessments made by these agencies, despite the dubious nature of their work before the collapse of Leman Brothers.

At the moment rating agencies are still receiving fees amounting to millions of dollars per annum for making “ratings surveillance” on CDOs (collateralised debt obligations).

Many of these instruments have lost most of their value despite being previously assessed by the agencies as being at a triple-A level.

The fact that the original ratings may have been very inaccurate does not affect this remuneration, which is made ahead of payments made to investors.

Last week the World Bank and the International Monetary Fund agreed to endorse an increase in the voting power of developing countries within the International Bank for Reconstruction and Development (IBRD).

It seems to me that the rating of national economies, especially of smaller states like Cambodia, would best be served by an independent body rather than a commercial company.

Perhaps the growing influence of representatives from developing countries in the IBRD will lead to the establishment of such a financially disinterested organisation.

Michael Hansen
Phnom Penh

Send letters to: [email protected] or PO?Box 146, Phnom Penh, Cambodia. The Post reserves the right to edit letters to a shorter length.The views expressed above are solely the author’s and do not reflect any positions taken by The Phnom Penh Post.

RECOMMENDED STORIES

  • Breaking: PM says prominent human rights NGO ‘must close’

    Prime Minister Hun Sen has instructed the Interior Ministry to investigate the Cambodian Center for Human Rights (CCHR) and potentially close it “because they follow foreigners”, appearing to link the rights group to the opposition Cambodia National Rescue Party's purported “revolution”. The CNRP - the

  • PM warns party of complacency in leaked audio

    Two leaked audio tapes, purportedly of Prime Minister Hun Sen speaking candidly to senior officials, appear to hint at insecurities within the ruling party over the controversial dissolution of the country’s main opposition, with the premier warning that the party’s “struggle” didn’t

  • Government approves plan to relocate Phnom Penh’s airport

    The government has signed off on a proposal to build a new airport to serve Phnom Penh and has earmarked land in Kandal province for the $1.5 billion project. A new international airport to replace the existing Phnom Penh International Airport will be constructed on partially

  • Music festival promises big stage, has even bigger hopes

    With a line-up of local and international artists, and a massive outdoor venue booked on Koh Pich, or Diamond Island, Saturday’s Diamond Moon Festival is aiming to showcase contemporary musical and artistic talents at a scale rarely seen in the Kingdom. [img] But the