Background and Methodology

Background: RATING DEVELOPMENTS is a unique bank analysis service covering banking systems in North Africa. The service is starting its coverage with Libya. The service is tailored for global commercial and investment banks, export credit agencies and trading companies. RATING DEVELOPMENTS started full time operations in January 2002. During this first phase of developments, the bank reports are produced by the Managing Director, Ramin Habibi.

For the decade prior to starting RATING DEVELOPMENTS, the Managing Director served as Regional President of Thomson BankWatch and as Managing Director of BREE, responsible for Eastern Europe, the former USSR, and Eastern and Southern Africa. Before 1990, he served as the Chief Analyst of Capital Intelligence and as a relationship officer with Bank of America.


Methodology: RATING DEVELOPMENTS works on the basis that banks in emerging markets now operate in fast moving business environments. Attention is concentrated on banks that have significant international banking operations or banks that are likely to start international transactions soon. Analysis focuses on whether the banks have (1) sufficient capital to build up or maintain a viable enterprise and (2) a management team and system that can respond to a rapidly changing business environment. The reports address three crucial questions:

Strategies: Do the banks have strategies to survive in a more competitive environment?

Management: Can managements execute their strategies?

Finances: Do banks have enough free capital to support their strategies?

These factors determine how successful banks can be over the longer term. Banks that are weak in these areas will lose market share and/or eventually require exceptional assistance, either from shareholders or the authorities.

Reports present a view of the long term prospects of banks as business partners. This approach recognises that many banks will receive necessary assistance if they encounter extraordinary adversities, though counter-parties that need to be rescued are unattractive partners. Therefore, the reports view banks as free-standing institutions rather than organisations with quasi-guarantors.

Sources for the reports are (1) information published by the banks, (2) international and local journals and newspapers, (3) responses to our questionnaires, (4) meetings with senior bank representatives, and (5) meetings with foreign and other local banks, multi-lateral agencies, bank supervisors, external auditors, computer suppliers, and others who have useful perspectives on the banking market.

Banks are visited twice a year. The first visits are made soon after banks release their annual financial statements and are the basis of RATING DEVELOPMENTS main reports. The second visit results in an update. Draft reports are always faxed back to subject banks to provide them with an opportunity to comment.