Thesis Abstract and Dissertation Abstracts

A Rating Agency in Maltese Financial Markets its Introduction and Implications

Thesis Abstract by Jeanette Borg from Date Submitted: Jul 6, 2005, 15:53

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Masters in Financial Services, University of Malta, 2005

Disseration Keywords: Rating Agency Financial Markets

This Thesis Abstract | Dissertation Abstract may be cited as follows:
A RATING AGENCY IN MALTESE FINANCIAL MARKETS ITS INTRODUCTION AND IMPLICATIONS, J. BORG 2005

Thesis Abstract or Dissertation Abstract (Summary):
Credit rating agencies attempt to provide independent reports on the credit worthiness of a range of institutions, governments, public bodies, and international and domestic active companies.

The study analyses the possible ways of introducing and establishing a rating agency in the Maltese financial markets and the benefits or otherwise for the financial market participants. It also identifies the regulatory setup for such an Agency. This analysis will be carried out from the perspective of investors, listing companies, the Malta Stock Exchange and the regulatory authority.

A combination of personal in-depth semi-structured and unstructured interviews was used. Interviews were conducted with 13 companies, 10 stockbrokers, 2 credit standing companies, a Malta Stock Exchange official and a representative of the Malta Financial Services Authority (MFSA).

This study concludes that there is a need for further measures to enhance the Maltese financial market. It also concludes that before the eventual introduction of a rating agency in Malta it is important that the Maltese authorities first provide the regulatory framework in which such an agency would operate. Furthermore, if Malta were to introduce a Maltese credit rating agency, it would have to equate Maltese ratings with those that apply in other European markets, yet in full respect to the Maltese socio-economic environment.

The study also finds that currently it is not the appropriate time to introduce a fully fletched rating agency and above all make its services mandatory. The costs of obtaining a rating would probably discourage companies from listing on the Malta Stock Exchange or any other recognised investment exchange. Also, mandatory ratings might deter any prospective listing from abroad as companies may prefer to list on other exchanges where ratings are not mandatory. The Maltese market should thus be gradually prepared for the introduction of a Maltese credit rating agency which services would then be regulated by the Maltese Authorities.

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