DUBAI Oct 17 Standard & Poor's has become the
first foreign credit rating agency to obtain a licence to
operate in Saudi Arabia, as the kingdom seeks to develop a
market in corporate bonds.
The Saudi Capital Market Authority (CMA) required firms
doing credit rating work to apply for licences last year, in
order to set standards for the industry. The firms were allowed
to continue operating pending decisions on their applications.
In a statement on Monday, the CMA said Standard & Poor's had
been approved. It did not comment on five other applications
submitted by, among others, Moody's Investor Services, Fitch
Ratings and the local Saudi Credit Bureau.
Few Saudi firms issue bonds and most rely heavily on bank
loans instead. Authorities want to encourage more bond issuance
to reduce risk in the banking system, which has become more of
an issue since low oil prices have cut flows of petrodollars
into the economy, hurting banks' capacity to lend.
To persuade institutional investors such as pension funds to
buy the bonds, authorities will need credit rating agencies to
become more active.
Stuart Anderson, managing director for the Middle East at
Standard & Poor's, said only about 15 percent of roughly 170
listed companies in Saudi Arabia had credit ratings, a rate that
could rise sharply in coming years.
"Saudi Arabia is a G20 economy with a relatively undeveloped
bond market. That means there will be a major business
opportunity as the market gains momentum," he said.
(Reporting by Andrew Torchia; editing by John Stonestreet)