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[Music]
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Rupa thanks so much for joining us today
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thank you you're the managing director
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and CEO of krisle and Regional head for
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South Asia for standard and pores tell
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me a little about what you do in that
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role uh as the CEO of chrystle I head a
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global analytical company uh we are
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India's largest rating agency we are
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also the leading provider of research
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and Analysis uh to the world's largest
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banks and leading corporations we work
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with them in the areas of equity
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research derivatives research fixed
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income research Etc in addition to that
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we also have uh uh a policy advisory
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business which works with governments in
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India and in 22 other Emerging Market
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countries uh in the area of
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infrastructure
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privatization okay so in general ratings
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are sort of a summary picture right talk
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about what role they play sort of in the
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markets why are they needed uh a rating
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uh in in a very simple uh very simply
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put is an opinion and an independent
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opinion on the degree of risk involved
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in timely payment of principle and
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interest on a debt instrument so the
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value that ratings add is first by
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virtue of their independence they are
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not uh expected to be a substitute for
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investors or Banks uh own due diligence
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uh and own analysis but they are an
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additional opinion which provides
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insight and the value that they have is
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by be by virtue of being independent
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opinions what ratings help markets do is
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price risk what ratings help markets do
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is get benchmarks across a range of
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companies across Industries across
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sectors and across countries so they
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play very important role in improving
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the transparency in markets in helping
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pricing and in ensuring comparability
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across a global uh across the global uh
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market and are there differences in how
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ratings are uh determined in different
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parts of the World in different regions
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can you talk about that yes typically it
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would depend on whether you're looking
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at a global rating agency uh like
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standard and pors or you're looking at a
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national rating agency like chrysle for
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standard and pors uh the the rating
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methodology and the rating process is
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designed to ensure comparability of
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ratings globally across sectors across
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Industries and across countries so
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standard and pors rates entities on a
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global scale which is common across the
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world when you come to National rating
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agencies like chrysle uh we rate
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companies on a national scale and the
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Assumption in our ratings is the is that
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the government of India in its capacity
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as a sovereign is AAA so the purpose of
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a national scale rating is to provide
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analysis and insight uh to to for rupe
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denominated debt raised in India for
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Indian investors so so global ratings
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and national ratings have have have
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different roles to play and they can
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coexist um ratings have been criticized
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of late um as potentially having been a
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factor in the recession talk a little
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bit about your take on that um you know
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are they truly independent how would you
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you know counter that assertion uh yes
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indeed there has been a lot of debate
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and discussion about the role of rating
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agencies in the global financial
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crisis and I will take this question in
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two parts one is uh what have been our
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learnings uh from what happened and two
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is I'll address some of the fundamental
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issues that keep coming up about
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conflict of interest that rating
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agencies face uh the first issue in
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terms of uh um uh you know what have
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been our learnings uh at crysal I think
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uh one of the things we saw and one of
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our takeaways from the global financial
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crisis is that it is very important for
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rating agencies to be one transparent
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about the assumptions that go into the
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analysis and two to communicate
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continuously to the market and to the
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investors as to what their thinking is
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uh so what have we done after the global
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financial crisis we have considerably
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stepped up our conversations and our
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dialogue with the investor Community we
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make sure that we talk a lot about our
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criteria our analytical process so that
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people have a deeper understanding of
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the same and we make sure that we keep
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our portfolio under surveillance so that
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so that we are sending out timely alerts
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to the
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market on the issue of conflict of
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interest in rating agencies uh the the
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the the main issue is really that the
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conflict exists uh because issuers pay
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rating agencies to assign them ratings
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uh the question is uh are there any
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other business models that are superior
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and I think what people tend to
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underestimate that the biggest advantage
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of an issuer pays model is that the
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issuer pays model allows ratings to be
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available free of charge to investors
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across the world on a whole variety of
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companies if there were only investors
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paying for a rating then only those
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investors who paid for the rating would
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actually get the rating and what that
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would mean is that a whole whole this
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whole transparency that rating agencies
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bring to the markets by by putting out
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comparable information on on so many
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companies companies would not be
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available so the greatest benefit of the
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issuer pays model is that it increases
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availability and transparency and makes
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available ratings free of charge to
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investors across the world now having
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said that does a conflict exist it does
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and therefore just like conflicts in
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every other part of financial services
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they have to be managed uh how do rating
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agencies therefore manage uh uh the
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conflict we at chrysle for example have
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a very clear separation
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uh between Business Development and
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commercial commercial issues as well as
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analytical issues uh an analyst
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compensation is in no way determined by
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the by the rating assigned or by the
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amount debt or by the Quantum of debt
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rated or any such parameter uh the
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ratings themselves are assigned through
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a multi-layer process uh and through a
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committee process so that no one
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individual uh can can bias the rating um
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in any particular manner so there are
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several checks and balances that are put
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into place to manage the conflict uh and
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I think uh uh you know that is something
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which uh rating agencies take very
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seriously because at the end of the day
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what they have to write on is only their
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reputation when a ratings agency
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upgrades or downgrades um the debt of a
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country um what effects or implications
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might that have sort of on the
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marketplace I think uh you know the same
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effect that it has uh uh when a rating
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agency upgrades or downgrades the rating
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on a corporate or on a bank or on a
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municipality uh and uh a rating upgrades
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indicates that the probability of
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default or the degree of risk is lower
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than it was earlier uh and a downgrade
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indicates that the degree of risk is
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greater than it was before the downgrade
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happened uh what that typically tends to
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affect is is the price at which the
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entity can borrow so so generally rating
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changes do have an impact on the cost of
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borrowings in some markets they could
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also affect uh the availability of
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funding available to a particular issue
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or a particular entity okay and to go to
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a more personal question um you have a
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background I believe in statistics um
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what got you interested in working in
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ratings well I went to business school
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and uh you know after that uh clearly a
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career in finance uh was something that
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was very appealing uh what has has
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really uh uh inspired me to stay on for
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so long in a company like chrysle is is
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actually the role that we play in making
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markets function better it is the
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culture that we have in the company
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which encourages uh um uh you know which
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is a true meritocracy where you're
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encouraged to think you're encouraged to
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debate issues where the power of what
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you say and the idea is more important
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than who you are I think uh the it's
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that culture really and it is the impact
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that we have on markets that has uh kept
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me for so long here thank you so much
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for joining us today thank you so much
