by Paul McBeth
Grosvenor chief investment officer David Beattie has shrugged off suggestions the upcoming implementation of a non-bank deposit taker (NBDT) prudential regime by Reserve Bank would make BondWatch redundant, as the regulation will leave several gaps for their service to add extra value to investors and financial advisers.
BondWatch will continue to rate corporate bonds, which won't be required to have a rating under the new regulations, and Beattie points out that its service is specific to a security rather than the issuer as a whole. It also rates potential event risks and the ability of investors to recover their money, rather than leave it up to the issuer to apply for a recovery rating like the major agencies.
The central bank issued an update on financial sector regulation in its May Financial Stability Report, where it said the new prudential regime for NBDT will come into effect later this year and next year.
The bank said "credit ratings should strengthen the incentives for NBDTs to develop and maintain sound governance and risk management practices and reduce the need for more comprehensive and expensive prudential regulation and supervision."
The RBNZ approved Fitch Ratings, Moody's Investors Services and Standard & Poor's Ratings Services in March, and while Grosvenor considered putting BondWatch forward as a rating agency, "there were too many hurdles" for the company.
"People are going to run the risk of thinking the new regime will be a magic bullet, but the reality is that there never is," Beattie said.
Paul is a staff writer for Good Returns based in Wellington.
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