Improving new investment finance

options in the Western Balkans Importance of credit information sharing

8 June 2010

Skopje, Macedonia

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Goal

Help financial institutions, investors, partners,

suppliers and clients by providing a tool that

couples a possibly unknown borrower or

issuer with informative and meaningful data

about creditworthiness

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Disclosure of assessed

creditworthiness - benefits

Enables easier access and improves the terms of financing from

financial institutions

Enables the use of more favorable credit conditions regarding the

BASEL II implementation in Bulgaria

Enables more financing sources - corporate bond issues

Supports the improvement of trade relations with various

contractors incl. cases with granted commodity credits

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Eases the process of participation under technical and financial support

programs

Expands the opportunities for attracting strategic investors

A tool for improving the operational efficiency and financial performance

of the company

A strong engagement on behalf of the management towards active

governance and maintenance of high quality of the offered

products/services

Supports the company’s image

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Service providers

International CRA

Financial institutions

Local credit rating institutions have better local environment knowledge;

reliable and profound analysis;

independence of credit assessment;

rates conformable to local clients budgets ;

faster reaction to changes;

no limitation on the ratings level ;

lack of conflict of interest ;

publicity, contacts.

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Legal framework

2005/68/EC

2006/48/EC, 2006/49/EC

2009/1060/EC

BNB

Financial Supervision Commission

National Statistical Institute

National Revenue Agency

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Deficiency and weakness of

reliable information

Individual data – NSI, NRA Companies are obliged to publish financial statements

Anonymous data only for scientific purpose

Aggregated data Lack of info in low level of aggregation of industries

Less than three, dominated 85% by a single company, secondary confidentiality

The disclosed information is highly aggregated

Delay of available info Approximately 1.5 years, quarterly limited info

No access to the NSI register Could be provided limited info-main activity, address, contact person, size of

the company, etc..

No access to tax info VAT monthly, tax yearly, social security monthly, etc..

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Services provided

Credit rating

Credit report

Credit limit online

Ancillary services

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Credit rating - assessed risk

factors Sources of business risk

Industry risk

Market position

Operational efficiency

External factors

Management quality Sources of financial risk

Financial performance

Financial flexibility

Peer group analysis

Financial forecast

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Credit report, credit limit online -

assessed risk factors

Sources of business risk

Market position

Sources of financial risk

Financial performance

- Profitability

- Leverage

- Liquidity

- Efficiency

Assessment of credit limit is

based on:

Cash flow and working capital

analysis;

Position of the target company in the

Industry in which operates - selected

financial indicators;

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Ancillary services

Market analysis

Risk analysis and assessment

Score cards – SME

Score cards – physical persons

Basel II – database

Basel II – probability of default

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Bulgarian Credit Rating Agency

June 2002 - foundation of the agency;

April 2003 – BCRA officially starts its business;

July 2003 - the agency signs a contract with BCCI (Bulgarian Chamber of Commerce and Industry);

June 2004 - the agency signs an agreement for technical cooperation with “ICRA” Ltd. (an Associated Moody’s Investors Service);

Feb 2006 – BCRA becomes a member of Bulgarian Economic Forum;

May 2006 – Financial Supervisory Commission, included BCRA in its recognition list along with Moody’s Investors Service, Standard & Poor’s, Fitch Ratings and AM Best Company;

July 2008 – Financial Supervision Commission joined BCRA in the list of the rating agencies along with Moody’s Investors, Standard & Poors and Fitch which can assign ratings of banks.

November 2008 – Hypo Investment AG chose BCRA АD for agency which assigns credit rating to issuers of bonds.

March 2009 – Contract concluded with Norwegian Embassy for analysis and assessment of the Bulgarian companies` creditworthiness.

May 2010 - BCRA local leader

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Bulgarian Credit Rating Agency

Thank you for your attention!

Sofia tel.: +359 2 987 63 63

Blvd. “Evlogi Georgiev” №95 www.bcra-bg.com