Beltone and CRIF have got the FRA’s greenlight to become the country’s second credit rating agency: Beltone Financial Holding and Italy’s CRIF Ratings were chosen by the Financial Regulatory Authority in June to set up the country’s second credit rating agency, the authority said in a statement yesterday. The alliance scored the highest on a set of criteria assessing all those who applied for a license

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And then there were two: Once the new credit rating agency gets off the ground, the Middle East Rating and Investors Service (MERIS) — a joint venture between Moody’s and Finance and Banking Consultants International (FinBi) — will no longer be the country’s sole credit rating agency.

But what does a credit rating agency do exactly? At its core, a credit rating agency assesses the creditworthiness of entities — which in the case of the license being offered up the FRA is securities. The license from the FRA will allow the newly-formed credit rating agency to assess the issuer of the security, the nitty-gritty details of the security, and its collateral, along with broader economic factors — think interest rates, growth rates, inflation — and then give the security a rating that ranks the risk of default.

A rating isn’t just for show: Without accurate and fair ratings, it makes it much harder for investors to assess the risks of acquiring certain debts and muddies the water in terms of pricing — effectively putting off investors altogether.

Speeding up the process: The establishment of another credit rating agency is expected to speed up the process of issuing debt — the process currently takes some 66 days, according to Asharq Business.

They weren’t the only companies vying for the license: An alliance of state-backed credit bureau I-Score and American credit rating giant S&P Global Ratings alongside another alliance made up of local investment advisory firm MGM Financial Banking and Consultants and India-based Infomerics Valuation and Rating also made bids for the license late last year.

Remember: The search for another rating agency to handle the growing popularity of local asset-backed securities has been in the works for a few years. The FRA scrapped its requirement that at least 10% of the agency be owned by international firms in a bid to move the process along. The authority was in negotiations with an unnamed company interested in the license in 2022 before opening the door for applications in August 2023.

What’s next? We’re yet to hear when we will see the credit rating agency launch — or even what its name will be — but we do know from the FRA that they’ve started the process of establishing and licensing the agency.

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