The Prudential Authority has signalled its intention to derecognise Moody’s Investors Service South Africa as an approved credit rating provider.
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The Prudential Authority (PA) has signalled its intention to derecognise Moody’s Investors Service South Africa as an approved credit rating provider.
This comes after the Financial Sector Conduct Authority cancelled the company’s licence to operate as a credit rating agency in South Africa. Banks will still be allowed to use Moody’s ratings for the next 24 months, but will then have to switch to other approved providers for regulatory purposes, such as calculating capital and credit risk.
Moody’s Ratings-SA has operated in South Africa since 2014 and will be phased out of the country’s regulatory framework by 2028.
The global rating agency voluntarily withdrew from the local registration process, leading to the cancellation of its licence and the start of the deregistration process
In a notice, the Prudential Authority informed banks, branches of foreign institutions, controlling companies and auditors that it intends to derecognise Moody’s Ratings-SA.
"The purpose of this Prudential Communication is to notify all banks that the Prudential Authority (PA) intends to derecognise Moody’s Investors Service South Africa (Pty) Ltd (Moody’s Ratings-SA) as an eligible external credit assessment institution (ECAI)". The Prudential Authority said.
It said the move is part of ensuring that only registered and approved agencies are used for banking regulation.
"Banks are required to map their exposures to ratings issued by eligible ECAIs, in accordance with regulation 23 of the Regulations relating to Banks (Regulations)".
Banks now have 24 months to continue using Moody’s Investors Service South Africa’s credit ratings before the transition takes full effect.
"Accordingly, banks may continue to use the external credit ratings issued by Moody’s Ratings-SA until the end of this 24-month period, after which the PA intends to issue an updated Directive on Matters relating to eligible ECAIs to replace Directive 7 of 2023, and to effect the derecognition of Moody’s RatingsSA".
mthobisi.nozulela@iol.co.za
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