Brickwork Ratings' license revoked

11 Oct 2022 , 08:53 AM

Credit evaluations of corporates will become more stringent as rating agencies increase their internal standards and inspection of data in response to Brickwork Ratings’ suspension by the capital-markets watchdog for failing to meet quality standards.

The Securities and Exchange Board of India (SEBI), which issued the prohibition last week, may also put an end to the practice of “rating shopping,” in which businesses approach rating agencies in an effort to obtain a higher rating.

Brickwork Ratings’ license was revoked by SEBI last week due to rule infractions.

SEBI director Ashwani Bhatia stated in his ban order dated October 7 that the disparities, inadequacies, and violations contained in the initial observations arising from the fourth examination are likewise comparable in type to those contained in the first three inspections.

These include failing to record management meetings or conduct site visits, failing to conduct an independent analysis of projections given by the issuer, delaying the acknowledgment of a default, delaying the occurrence of a material event, and engaging in a conflict of interest.

Indeed, nearly ten years ago, Brickwork Rating awarded triple-A status to a Basel-III compliant additional tier-I quasi-equity instrument. Bank of India, a bank that is owned by the government, was the recipient.

Even State Bank of India’s perpetual bonds, or AT1 papers, are given an AA+ grade, one notch below the bank’s overall corporate rating. The biggest state lender is SBI.

Brickwork Ratings made the decision to challenge the SEBI ruling.

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