Best Practice in Credit Rating

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Credit rating tells business people about the credit worthiness of financial institutions that issue debt. Businesses issuing credit loans must ensure best practices to ensure risk management. When the borrower defaults, there can be consequences which have massive impact on both the debtor and the creditor. In order to ensure risk management in financial institutions there are international best practices in credit rating which as beneficial.

The Association of Southeast Asian Nations and the People’s Republic of China, Japan and the Republic of Korea have collaborated with the Asian Bond Market Initiative and the Asian Development Bank (ADB). This team has provided assistance to build the capacity of domestic rating agencies (DCRA) to encourage comparability of ratings as a best practice.

Understanding the DCRA ratings is important because it has been assigned by global rating agencies (GCRS) to ensure standards in best practices of credit agencies.

Essential Best Practices for Credit Rating

These standard best practices are essential for success in risk management for all financial institutions that issue debts all over the world. The ADB has ensured that the DCRA is well trained on rating best practices by producing the Handbook on International Best Practices in Credit Rating.

Further reading: Corporate Governance | Audit | Performance Improvement

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