Responding to criticism levelled by Opposition Leader Cole Simons on “KBRA’s review of Bermuda’s debt, Finance Minister Curtis Dickinson took aim at a recent article published in the daily newspaper on October 20.
Speaking at a news conference on Monday (Nov 1), the Minister referred to article, ‘OBA raises doubts about use of Kroll Bond for Bermuda Report”.
“In this report, the leader of the Opposition and Shadow Finance Minister is credited with making several quotes in relation to KBRA’s review of Bermuda’s debt, which I highlighted in my press conference on October 12th. I would like to specifically refer to a few of them,” said Mr Dickinson.
“The first quote that I will mention is as follows: ‘The question floating around Bermuda’s financial community is, who is Kroll Bond Rating Agency (KBRA)? Where did they come from?’
“In response, I would note that KBRA rated their first transaction in 2011 and to date have issued 48,000 ratings across 3,400 entities. KBRA rates several countries including the US, Canada, the UK, Japan, Mexico and Bermuda.
“KBRA also rates Lloyd’s of London whose CFO, Burkhard Keese, has specifically recognized the agency in comments noted in a Lloyds.com article dated April 22, 2021.”
The article, entitled, ‘Lloyd’s appoints new rating agency and receives AA- financial strength rating’ attributes the following statement to Mr Keeses: “We are delighted to appoint Kroll Bond Rating Agency and add an AA- stable outlook rating to sit alongside our financial strength ratings from our existing agencies. We believe it is important to have a diversity of views in the ratings market and welcome KBRA as a new entrant that will provide a fresh perspective on Lloyd’s.”
“The article detailing the Opposition Leader’s comments on KBRA also addressed additional issues, for which I believe it is important to provide clarification,” the Minister added.
In this regard, he referred to the following: “What made KBRA so attractive to the PLP Government that it would spend even more money for its rating and how much more credibility did it buy? There is more to this credit assessment than meets the eye.” A further related quote is “so why are we deviating from our long relationship with the gold standard of international credit rating agencies; agencies that are intimately familiar with Bermuda’s unique economic model?”
“In response, I must clarify that KBRA is not compensated by the Bermuda Government for the surveillance report that they produce for our country,” the Minister said.
“KBRA approached the Government in 2018 to start producing annual sovereign ratings, as they were already providing ratings for several Bermuda-based companies, including insurance/reinsurance companies and other financial institutions.
“As they rate several companies operating in and from Bermuda, they believed it is prudent to rate the country as well. Regarding the second quote, the reference to the gold standard of international credit agencies was presumably meant to refer to Moody’s and S&P, with whom Bermuda has had long-standing relationships.
“I would highlight that Bermuda has certainly not severed our relationship with either of them. Those two agencies still rate Bermuda annually, as per normal. In fact, I reported in the House on May 7th 2021, on the generally positive report from S&P and now, in today’s (Nov 1) press conference, we are also providing this update on the Moody’s assessment.
“Therefore, although not solicited, the Government welcomes the diversity of independent feedback that KBRA represents. Additionally, I would again emphasize that all the rating agencies have expressed similar support for the prudent and balanced approach that this Government is taking to manage the economy, through what is for all countries around the globe, an extremely challenging time.
“There is one further section from the article criticizing the publication by the Government of KBRA’s positive review, that I would like to speak to. In this section the following quote is attributed to the Opposition Leader – ‘Could it be that KBRA was the only credit rating agency who was willing to help the Government showcase its fintech and digital commerce industries? Stay tuned. There is more to this appointment and we await the details’.
“To reply to this, I would like to quote three sentences from the July 2, 2021, Moody’s annual credit analysis. These are: “The Government also continues to develop its fintech sector on the island, using its strong regulatory framework to become an incubator in this globally developing sector. The regulator maintains high standards to protect its world-renowned reputation.
“If the fintech sector becomes successful, it will likely help diversify the economy, building on Bermuda’s established financial sector.” Given the focus globally on digital and fintech matters, and Bermuda’s own work in this regard, it is to be expected therefore that all reputable rating agencies will carry out an assessment in this area. It is noteworthy that the conclusions reached by Moody’s in this regard are not dissimilar to the relevant views also expressed by the Kroll Bond Rating Agency.
“In summary, I would therefore note that KBRA is a quality and reputable rating agency and it is noteworthy that KBRA are not the only rating agency to see potential and value in the Government’s work to stabilize, strengthen and grow the economy, as well as to endorse the sound and prudent fiscal approach being taken by Government. Similar conclusions have also been reached by S&P and Moody’s.”
The Minister concluded by expressing thanks to the Ministry of Finance team, “and all of those in the public and private sector who are working with us, as we seek to effectively manage Bermuda’s fiscal affairs, and to get the word out” on the impact of that work”.
“Ensuring that the public gets the facts around Bermuda’s ratings is important,” he said.
“As I have previously stated, Bermuda’s credit ratings are critical when it comes to our ability to borrow money at favorable rates and are also relevant to the companies who operate from and within Bermuda. They also are key to the continued strength and growth of our economy. Therefore, we will continue to do what is necessary, with the support of the people of Bermuda, to maintain and strengthen these ratings in a way that helps to secure a brighter, better tomorrow for all.”