New fin coy rules require education

Ratings agency Standard & Poor's sees a need for investor education following the announcement of new rules for the non-bank financial sector.

Thursday, 21 June 2007

Such companies, known as non-bank deposit takers (NBDT), are a growing part of the financial sector.

With that growth has come concerns that inexperienced investors may not be adequately aware of the risk profile of their investment.

Today S&P said credible international credit ratings on NBDTs would help financial advisers, planners, and investors to better understand the risks in the non-bank financial institutions sector.

But while its ratings were well understood in the institutional sector they were less so in the retail sector, S&P corporate and government ratings director Gavin Gunning said.

"Our most important short-term objective is market education."

S&P ratings had an associated probability of default that would be powerful information for helping investors differentiate between institutions of varying risk profiles.

Market education initiatives would focus on explaining what ratings meant in the context of their associated probability of default, Gunning said.

Credible credit ratings were one of the factors that could contribute to efficient self-regulation of non-bank financial institutions but were not a substitute for adequate issuer disclosure or competent investor advice.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Deposit Rates go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.