Kuwaiti governor argues for credit ratings regulator
Regulator would ensure ratings are high quality and used correctly
Mohammed Al-Hashel, the governor of the Central Bank of Kuwait, has recommended the establishment of an independent regulator for credit rating agencies.
Speaking at the Financial Stability Board's regional meeting for the Middle East and North Africa, Al-Hashel underlined the flaws in credit rating agencies' (CRAs) methodologies that contributed to the global financial crisis. However, he argued that rather than reducing "the need and the scope" for CRAs, it would be better to establish a regulator.
Al-Hashel said an independent regulator would help overcome the CRAs' shortcomings. Although he denied the need to reduce the use of credit ratings, he said such a regulator would help to ensure the ratings are used as a supplement to local knowledge, rather than an alternative.
He added that the Central Bank of Kuwait uses credit ratings to help manage its foreign exchange reserves. "The use, however, is not mechanistic and some time ago the central bank developed an internal risk evaluation procedure," he said.
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