Minister Smith told The Bahama Journal on Wednesday that the establishment of a regional credit rating agency is unlikely.
"The regional credit rating may or may not fly," he said. "For the time being and in the foreseeable future we will continue to rely on international credit rating agencies because there is a perceived increased credibility. These agencies know the region; they know the banks which operate in the region. They work with the region and do the assessment."
Recently, Moody's Investor Service, one of the most reputable rating agencies in the world, reconfirmed the country's 'A3' rating.
Last month, the government took advantage of this favourable rating by floating a bond issue, raising $200 million to pay off a $125 million short term loan and help finance the 2003-2004 budget.
"I think a regional agency may not have the same type of credibility of the international agencies, simply because when we go to market, we go to international markets and not to regional markets to raise capital… it's a way of assessing the credibility of the burrower," Minister Smith said. "In banking terms, your most preferred customers, you tend to charge less because they are less of a risk than the customers who are not as financially strong, so they rate countries the same way."
On the other hand, Dr. Williams feels that such a regional body would be helpful in the implementation of standards set by international agencies.
"A credit rating agency could help to remove distorted perceptions among financial entities within the financial system, and promote the move away from rule-based supervision to the more proactive risk-based supervision," she said.
Minister Smith believes, however, that many benefits could be derived from a regional stock exchange. He believes that the exchange can exist outside the Caribbean Single Market and Economy.
"You would be making it easier for capital to move around the region for investments by way of equity," he explained. "There would be more opportunities for investors. In many countries though, you would probably have to relax the exchange control on capital flows in relation to portfolio investments or investing in stocks.
"What you're doing basically is cross listings whereas a person in The Bahamas can buy stocks in a Trinidad oil company if that were listed or a Trinidadian can buy stock in Bank of The Bahamas if that were listed. What that means is there will be more players in the market and the prices will be market determined."
Minister Smith added that the Inter-American Development Bank holds the same view that at some point the region should be able to integrate stock exchange activities.
"Integrated capital market activities will permit for the co-existing of shares which will make the capital markets in the region more dynamic," he said. "I think it's a way of getting more liquidities in the market, deepening and widening capital markets on a regional basis and I suspect that sooner or later that would have to become a reality if the Caribbean including The Bahamas is to participate more and more in international trade."
Minister Smith pointed to the IDB's attempt to provide technical assistance to CARICOM for the establishment of a Central Depository Unit about five years ago.
The unit would have been the first phase in integrating a regional stock exchange, which was to include The Bahamas, Trinidad and Tobago, Jamaica, Barbados and the Dominican Republic. However, it never materialized.
According to Dr. Williams, a private company is already assessing the feasibility of the cross-listing of equities on a regional stock exchange.
By Hadassah Hall, The Bahama Journal
