Colombian bank executive Rafael Gonzalez and international credit rating agency Thomson Financial BankWatch responded to a request from the Superintendent of Banks to organize a second domestic rating agency. The company, initially named BankWatch Ratings de Colombia, was founded in 1997 and commenced operations in early 1998 following completion of a comprehensive licensing process. Although its principal competitor in Colombia had been formed some three years earlier, BRC grew rapidly as it creatively used the BankWatch branding to establish a leadership position in ratings of financial institutions. A supportive regulatory environment also provided new rating opportunities, most prominent of which were investment funds.
In 2001, Thomson Financial BankWatch was acquired by Fitch Investor Services, resulting in an awkward situation in which Fitch became the strategic shareholder in both Colombian rating agencies. In early 2002 Rafael Gonzalez purchased the Fitch shares and attracted new local and international shareholders, the latter including Messrs. Roy Weinberger and Mahesh Kotecha. Mr. Weinberger had previously been involved with BRC from its founding in his role as Director of International Business Development for Thomson Financial BankWatch. The Colombian supervisory authorities formally reviewed the company's new shareholder structure and its operating plans and granted a permanent license extension. Since the change of share holding and name, BRC has resumed a growth trajectory. New regulations establishing rating requirements for public sector enterprises and municipalities have created additional rating opportunities in recent years. On February 12, 2008, BRC celebrated its 10th anniversary at the Jockey Club in Bogota, which event included the presentation of a study, co-sponsored by BRC and La Cepal, prepared by noted economist Juan Carlos Echeverry containing recommendations for the development of Colombian capital markets, and followed by a concert by "Camerata Divertimento".
COMPLIANCE WITH INTERNATIONAL PRACTICES
BRC has, since its beginnings, followed best international rating practices that contribute to market credibility and high quality analysis. These include:
a. Hiring Practices – All analysts have, at minimum, a bachelor's degree from an accredited university. Many have, or are working on, advanced business degrees. Practically all analysts have prior experience in industry or were previously employed by a major commercial bank or one of the regulatory bodies.
b. Training and Development – New analysts are given an orientation to the unique business of credit ratings and the specialized roles and responsibilities they have as contributors to the agency's success. Analysts, regardless of experience level, are encouraged to develop their analytical skills and general knowledge of industry and financial markets. They are encouraged to further their educational and professional credentials.
c. Rating Processes – BRC publishes a description of its rating process, including information requirements, quantitative and qualitative analytical methodologies, the appeal process, and rating dissemination practices. Ratings are reviewed and confirmed (or, if necessary, changed) quarterly, although the regulatory requirement only mandates annual reviews.
d. Rating Committees – All ratings are decided by duly constituted rating committees comprised of experienced analysts.
e. Rating Quality – Every year BRC prepares and publishes an updated rating transition matrix study that shows the frequency and magnitude of rating changes from year to year.
f. Growth of Professional Staff – The size of BRC's professional staff has grown as rating portfolios have expanded. There is a clear recognition that thoughtful and timely analysis is directly related to the quality and quantity of resources devoted to the task. Ratings per analyst number 20 or less.
g. Regulation of Employee Investment Activities – At orientation and every year thereafter, employees are instructed on the proper use of non-public information. Purchasing or holding any type of rated security is prohibited by regulations issued by the supervisory authorities. Such prohibition extends to first degree family members.
h. Confidentiality of Information Received from Clients – BRC operates under strict rules with respect to disclosure of non-public information. A specific clause within each rating service agreement defines the responsibility of the rating agency and its employees in terms of use of information. Privileged information must, under no circumstances, be disclosed to persons outside the agency or to persons within the agency who have no need of such information.
On an ongoing basis, BRC publishes sector studies and articles about ratings and markets that we consider relevant and interesting for market participants. We have also recently begun distribution of a quarterly newsletter highlighting major rating developments occurring within the previous three months.
