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THE Monetary Authority of Singapore (MAS) has launched a Singapore-dollar (SingDollar) Credit Rating Grant to encourage issuers in the domestic bond market to provide rated bonds.
It is also giving out SingDollar credit rating grants over a five-year period to help issuers offset the associated costs.
Announcing the move on Friday, MAS said that making credit ratings readily available in the home bond market will improve market transparency, and provide timely and independent assessments of the credit worthiness of issuers throughout the life of a bond.
Credit ratings will also allow the many regular issuers in the SingDollar bond market to attract a broader and more diverse investor base, including international institutional investors.
These issuers are currently unrated, and rely mainly on the same pool of domestic investors.
The banking and financial markets regulator also said that only about half of the outstanding SingDollar bonds are rated, and that it would like to see a higher share of rated issuances in the home bond market.
Qualifying issuers of SingDollar bonds who obtain credit ratings from an international credit rating agency (CRA) will be able to claim up to the full amount of their credit rating expenses, subject to a funding cap of S$400,000 per issuer, MAS said.
Apart from encouraging issuers to rate their SingDollar bonds, MAS deputy managing director Jacqueline Loh said that the regulator "also urges investors to carry out proper due diligence and understand the credit ratings and other indicators of financial strength of an issuer before investing".
Clifford Lee, head of Fixed Income at DBS Bank, said: "This initiative to provide direct monetary incentives to encourage SingDollar bond issuers to attain formal credit ratings for their bonds is a bold step by MAS to encourage better disclosure standards, more transparency and increased sophistication in the SingDollar bond market. This can only be beneficial to issuers and investors alike, and lend confidence to the continual and positive development of the SingDollar bond market."
The credit rating grant is open to both foreign and domestic issuers. Interested parties may contact MAS, the CRAs or any of the SingDollar bond arranging banks operating in Singapore for more information.