In its comments on the implementing rules and regulations being drafted by the SEC, Philratings, Inc. said the P50-million paid up capital is too high considering the operating requirements of credit rating agencies (CRA) whose primary assets are human resource-based.
Philratings said the backbone of a credit rating agency it its pool of analysts who can perform credit evaluation of debt issues and other debt obligations, and who can translate their analytical skills to a sound credible credit opinion.
"The level of paid-up capital should be that amount required to start the business, bring it to a point of relative financial self-sufficiency," Philratings said in its formal comments. "We might add that initial financial sufficiency can be established from equity funds or from borrowings, the combination of which is essentially a business decision."
According to Philratings a paid-up capital of P10 million could be a good benchmark as adequate capitalization for a credit rating agency that already has an ongoing operation.
Philratings pointed out that the proposed P50-million paid-up capital is even higher than the minimum requirement for some financial institutions such as rural banks and lending investors.
For such entities, Philratings said a higher paid-up capital is understandable since their transactions with the public are of greater and wider magnitude and therefore, need a higher capital cushion.
While Philrating agreed with much of the provisions of the IRR, it added that CRAs should have an autonomous rating committee or rating board whose members are seasoned analysts, business practitioners, economists or senior professionals of the academe.
To further ensure the credibility, Philrating said the CRA should be required to appoint a chief executive officer who would be a full-time manager and should not have any other business affiliation as employee, consultant, adviser or director except as a full-time professional or executive for the CRA.
Philrating said the SEC should require credit rating for all bonds, commercial papers, other debt securities and debt obligations ro derivatives intended to be offered to the public for investment or investment participation.