CREDIT Rating Information and Services Limited
CRISL is the first ever joint venture rating agency operating in Bangladesh since 1995. It is a joint venture of Malaysia Berhad (RAM), JCR-VIS Credit Rating Company of Pakistan, few financial institutions and a host of celebrated professionals of Bangladesh. With a license from the Securities Exchange Commission (SEC) under Credit Rating Companies Rules 1996, CRISL now appears as the flagship organization of Bangladesh. CRISL is a founder member of the Association of Credit Rating Agencies in Asia (ACRAA) which is sponsored by the Asian Development Bank, where CRISL has significant contribution towards the development of the profession of rating agency in the Asian region. CRISL is a public limited company dedicated for credit rating and related services and is being recognized by Bangladesh Bank as the External Credit Assessment Institution (ECAI) to offer its services to the banking community for banking client rating. CRISL provides its services with high business and ethical code as approved by the International Organization of Securities Commission (IOSCO), Securities and Exchange Commission of Bangladesh and Bangladesh Bank ECAI recognition Criteria.
Credit Rating Information and Services Limited is a company that started its journey to implement a Concept in Bangladesh – “Credit Rating”. Before CRISL, “Credit Rating” were text paper words for the teachers and students of Bangladesh. The voyage of how CRISL conceptualized this idea in 1995 and implemented it in Bangladesh and finally achieved its operating license in 2002 – after almost eight years of struggle – has a long, interesting, exciting and also painful history. CRISL is now the national flagship company representing the profession at home and abroad.
The basic root of formation of CRISL may be linked up with the Government’s effort to organize the first ever Euromoney Conference in Bangladesh in 1994, where a large number of international investors and good number of world investment forum members had participated. The participants had concluded as the reason for not receiving desired investment is that Bangladesh did not have any rating agency, and neither had the country been rated officially by any international rating agency. In absence of the above, some of the international rating agencies, based on unfounded and partial information, rated Bangladesh as “C”, which meant a highly speculative and risky country for investment. Under the above backdrop, the then Chairman of the Securities and Exchange Commission- Mr. Sultanuzzaman took the initiative to encourage the private sector to come forward to float a rating agency. As part of his initiative he contacted few professionals to explore such as feasibility. Since the concept of rating and rating agency was absolutely new and finding it as not a lucrative business proposition and rather a highly research based and very responsible job, no positive response was received by him. At the last quarter of 1994, the proposal was conveyed to Mr. Muzaffar Ahmed, a Fellow Cost and Management Accountant through his former colleague Mr. Mobassar Husain, a former Managing Director of MIDAS and Ex Boss. Finding the proposal interesting, Mr. Ahmed took initiative to know about the role of rating agencies and rating. Mr. Ahmed met SEC Chairman Mr. Sultanuzzaman several times to know the extent of SEC support. The SEC Chairman assured support of SEC and introduced Mr. Ahmed to some regional rating agencies and asked him to visit few of them in India. Based on the above Mr. Muzaffar Ahmed visited several rating agencies in India to know the operational aspects of such companies and its prospects. Internally, Mr. Ahmed discussed with few professionals and business people and made detailed presentations which ultimately convinced them to join and invest in a rating agency to be formed.
After having several discussions with SEC and with its encouragement, Mr. Muzaffar Ahmed initiated the floatation of “Credit Rating Information and Services Limited” in July 1995 with the following professionals: 1 Yusuf Abdullah Harun FCA, former President of Federation of Chamber of Commerce and Industry, a fellow Chartered Accountant and industrialist; 2 Mr. Mobassar Husain MBA, a former financial and Management consultant; 3 Mr. Muzaffar Ahmed, A former university teacher and Fellow Cost and Management accountant; 4 Dr. Mohamad Abdul Moyeen, a teacher of the Department of Management Studies, Dhaka University 5 Mr. Mohammad Abdul Momen, a teacher of the Institute of Business Administration, Dhaka University; 6 Mr. M Mohiuddin, FCMA, a former President of the Institute of Cost and Management Accountants of Bangladesh; 7 Mr. Murshed Salam, a businessman; Immediately after formation of the company, the Securities and Exchange Commission was approached for a license to operate the company as a rating agency. But SEC desired that a broad based regulation need to be promulgated before it considers licensing CRISL as a rating agency At a later stage, Mr. Yousuf Abdullah Harun and Mr. Murshed Salam had decided not to continue with the company as they observed that the company would need long time to start operation and may require substantial capital to continue without license from SEC. With the withdrawal of the above persons CRISL was put in a distress situation. At this stage Mr. Muzaffar Ahmed started discussion with some senior professionals and finally convinced Jamal Uddin Ahmed FCA, former Deputy Prime Minister and former President of ICAB, Mr. Motiul Islam, a Former Secretary Government of Bangladesh. The above professionals joined CRISL with nominal amount of share capital. At a later stage, at the initiative of Jamal uddin Ahmad, Mr. Rashed Uddin Ahmad FCA, FCMA was also inducted in the shareholding of CRISL. Mr. Jamal Uddin was elected as the Chairman of the company.
On receipt of the application from CRISL for licensing, the SEC had several discussions with CRISL and took the initiative to have a regulatory framework for promoting and controlling the operation of rating agencies. The SEC after review of the operating procedure of the regional rating agencies and in line with them promulgated the “Credit Rating Companies rules 1996” in 1996, making it mandatory for the rating agencies to have joint venture with any international rating agency as a part of licensing requirement. Before the above regulation was promulgated, CRISL was inaugurated on 18th January 1996 by Mr. Saifur Rahman, the then Minister, Ministry of Finance, Government of the People’s Republic of Bangladesh in the presence of large number of dignitaries, including representatives from various embassies, World Bank, USAID etc. But in view of the new requirement of having Joint Venture in the newly promulgated SEC Rules, CRISL had to remain dormant and required to identify an international rating agency as joint venture partner for technology and training.
As stated earlier, in order to fulfill the requirement of Credit Rating Companies Rules 1996 for its licensing, CRISL was to hunt for an international Joint Venture Partner. CRISL contacted Standard and Poor’s, World’s largest rating agency to participate in business with CRISL in Bangladesh. But S&P replied that they did not have any plan to expand in Asia. CRISL also contacted Indian rating agencies, but SEC replied that they are not international, rather regional. At that point in time, Mr. Faheem Ahmad of Vital Information Services Limited, Pakistan was in the process of negotiation with Duff and Phelps Credit Rating Agency (DCR) USA-,to set up the second credit rating agency in Pakistan under the name and style “DCR-VIS Credit Rating Company Limited”. DCR was the World’s third largest credit rating company with NSRO status in USA, operating in about 10 countries through joint venture. Mr. Faheem has shown his interest to involve DCR with CRISL through a joint venture where DCR-VIS will also participate. Based on the above understanding Mr. Faheem Ahmed paid a visit to Bangladesh to finalize initial ideas. In the mean time, CRISL also contacted Rating Agency Malaysia Berhad, the premier rating agency of Malaysia to join CRISL in equity participation. The RAM at that point of time was also trying to have a joint venture with DCR to operate in Hong Kong. RAM was pleased to take an equity position in CRISL. Based on the above, the DCR agreed to join as the main joint Venture Partner against 15% equity participation through DCR-VIS at the initial stage and another 30% at a later stage from other partners . The JV was signed on 14th March 1997 which consisted of three Agreements- General Agreement with all CRISL shareholders, Trade Mark and Corporate license Agreement and Technical Assistance Agreement. The above agreement was submitted to the SEC Bangladesh as a part of the requirement for getting the credit rating license.
The SEC reviewed application made by the CRISL and advised to convince DCR to join directly in the equity participation instead of through DCR-VIS as against its earlier direction to have only joint venture for technical collaboration. The SEC further advised CRISL to take IFC of World Bank in the Joint venture before SEC finally agree to the proposal of Licence. CRISL initially decided not to allow IFC in the shareholding due to its long bureaucratic operating time to decide on any investment. In addition, CRISL was not interested to take any investment partner, since it has already hooked DCR and RAM in its joint venture. However, as desired by SEC, CRISL agreed to consider such proposal.
Pursuant to the advice of SEC, CRISL contacted IFC and placed the proposal before them to join CRISL with maximum 10% equity. The IFC team both from Bangladesh and also from Washington visited CRISL several times. They also visited DCR at Chicago to discuss with them about joint venture. After a detailed study of almost six months, IFC proposed that there should be new rating company to be promoted by CRISL shareholders excluding ICB, which they considered as a conflict of interest. IFC also suggested including FMO of the Netherlands in sponsorship. IFC further desired that they must see the investment viability before they finally decide on the venture. The IFC engaged DCR India Limited, a joint venture of DCR to carry a market survey in Bangladesh to see the investment viability of floating a rating agency in Bangladesh. The DCR India took several months, finalized the report and submitted the same to SEC. It was understood from the SEC that the DCR India concluded that Bangladesh market was very small and investment in rating agency was not a commercially viable proposition. Based on the above, CRISL’s application for license was shelved by SEC without any intimation to CRISL. The Board of CRISL made several visit to SEC and tried to convince them that rating may not be a profitable venture, but Bangladesh must have at least one rating agency for the sake of capital and especially for the development of bond market. But SEC remained silent on the point of licensing CRISL.
During the above period CRISL Board made several presentations at SEC, and tried to convince that the IFC looked at CRISL as an investment proposal and not as a national need. They had nothing to contribute in the development of CRISL professionalism However, SEC remained silent on the issue. Finding no other alternative, CRISL Board had several meetings and decided that since the SEC had initially motivated CRISL sponsors to float the rating agency and with its approval CRISL sponsors had taken capital from aboard, the SEC can not deny its responsibility of providing a license to CRISL, when CRISL had fulfilled all the requirements. Therefore, a legal notice may be served on SEC explaining the above situation. CRISL also decided to give a memorandum of facts from the very beginning with all correspondences and actions taken before the Board decides on liquidation of the company. Based on the above decision, the Board decided that a) a legal notice be served on SEC b) CRISL’s office at BSB Bhaban be closed and notice be served to BSB for cancellation of Rental agreement and c) CRISL Bank account be frozen. Based on the above decision a Legal Notice was served on SEC, office was shifted to a room at the National Scout Bhaban, which was the Office of the Pride Group of Companies.
At the beginning of 2001, after a long silence, SEC Chairman suddenly asked CRISL to see them to discuss on the issue of license. CRISL team was informed that SEC was, on principle, agreed to provide license to CRISL. However, CRISL was asked whether the joint venture partners were still interested to continue with the joint venture. Based on the above assurance, CRISL contacted Fitch rating agency which has, by that time, absorbed DCR, as to whether they were willing to continue with CRISL. Fitch informed CRISL that since the regulators had taken long time to provide license to CRISL, they were not interested in the joint venture agreed by DCR earlier. At this backdrop, SEC asked CRISL to sign a technical collaboration with RAM to provide technical support to CRISL in addition to its equity participation. Based on the above advice CRISL CEO visited Malaysia to sign an6 Agreement for Technical support from RAM. Finally CRISL signed the above agreement with RAM for technical support and training of CRISL professionals against a Fee for several years. On finalization of the above and its submission to SEC, CRISL was awarded license by SEC – and a long journey from 1996 to April 2002 was over.