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.

MOST VIEWED

  • Phnom Penh authorities ban march for Human Rights Day

    Phnom Penh authorities have banned a planned march as local NGOs and workers’ unions gear up to celebrate the 70th anniversary of the signing of the Universal Declaration of Human Rights on Monday, with a youth group leader saying they would march nonetheless. The UN

  • Government deports 235 Chinese scammers

    THE Immigration Department of the Ministry of Interior on Thursday deported 235 Chinese nationals, 35 of whom were female, via the Phnom Penh International Airport for their part in a Voice over Internet Protocol (VoIP) online money extortion scam. The deportees were arrested on November 26 over the

  • Phnom Penh’s Jet’s Container Night Market shuts down

    The famous Jet’s Container Night Market in central Phnom Penh has shut down due to the high cost of the land rental, company representatives claim. Jet’s Container Night Market is the largest such market in Phnom Penh. It operated for just over two

  • Hun Sen rejects ‘rift’ rumours spread by ‘stupid gangsters’

    Prime Minister Hun Sen on Wednesday denied a “rift” among top leaders of the Cambodian People’s Party (CPP), and rejected claims that Senate president Say Chhum and Interior Minister Sar Kheng were set to be removed from their positions as rumours spread by “gangsters”.