Bankers see new era in global business

Bankers see new era in global business
Sajjadur Rahman

Top bankers said yesterday a relatively positive rating on Bangladesh by a globally reputed firm would help them reduce costs for cross-border business exposures.

They also said the country would now get an opportunity to raise equity and debt required for such mega projects as energy, power and infrastructure.

Standard & Poor’s maiden sovereign rating for Bangladesh at BB-, announced yesterday, indicates a favourable comparison with the rest of the South Asian nations except India.

“I am sure we’ll see the benefits in the pricing of cross-border risk by international financial institutions,” said Muhammad A (Rumee) Ali, chairman of BRAC Bank.

He said: “Bangladesh is no longer an ‘unknown risk’ country.”

Generally, foreign banks and other lenders put a premium for country risk even in settling a letter of credit (LC) forwarded by a local bank. The premium varies from bank to bank and country to country. The bankers said the country risk sometimes costs local banks up to five percent of the loan or LC value.

K Mahmood Sattar, chief executive officer of The City Bank, was electrified to see Bangladesh’s rating better than Sri Lanka and Pakistan and similar to countries like Turkey and Indonesia.

“Now we’ve a negotiating ability in settling and confirmation,” said Sattar, also the chairman of Association of Bankers Bangladesh, a forum of 30 private banks’ chief executive officers.

Confirmation is sought when a beneficiary is not comfortable with the financial standing of the issuing bank or is doubtful about the country risk of the issuing bank.

Anis A Khan, managing director of Mutual Trust Bank, said the rating would brighten the country’s image.

“It will help us in global business,” said Khan.

Mamun Rashid, Citi country officer, said cross-border borrowing and lending will be competitive and transparent. “There will be no arbitrary rating.”

Tarique Islam Khan, head of HSBC Global Markets in Bangladesh, said HSBC, as one of the rating advisers throughout the process, is happy about the outcome with a ‘stable’ outlook.

“Expectations outside Bangladesh had been lower than the outcome. So, this will have a tremendous positive impact on Bangladesh’s country image among investors and economic analysts,” he said.

Alamgir Morshed, director of Standard Chartered Global Markets in Bangladesh, said: “Credit rating assesses the ability and willingness of a borrower to repay.”

Morshed quoted an S&P overview on Bangladesh that the stable outlook reflects “our expectations that prudent macroeconomic policy setting will prevail and microeconomic reforms to address growth constraints will continue”. This means reforms, policy changes and the government’s financial ability matter in a credit rating.

“Bangladesh is a good borrower and it has been proved,” he said.

source:http://www.thedailystar.net/newDesign/news-details.php?nid=133283