Africa-Press. The African Union’s credit rating body warned that Fitch Ratings could mislead investors if it continues to issue credit ratings for “Afreximbank” after the bank severed ties with one of the world’s three largest credit rating agencies.
The bank, officially known as the African Export-Import Bank (Afreximbank), announced its decision, citing concerns about the quality of the agency’s methodology.
In a statement, the African Peer Review Mechanism (APRM) of the African Union said it considers Afreximbank’s decision justified. It added: “Any future ratings issued by Fitch regarding the bank would be unsolicited and non-participatory, and could therefore mislead investors.”
Fitch declined to comment on the position of the African Peer Review Mechanism.
In June, Fitch downgraded the credit rating of the African Export-Import Bank (Afreximbank) to one notch above “non-investment grade,” citing increased credit risks and weak risk management policies. It also assigned the bank a “negative outlook,” a term used by rating agencies to warn of a potential future downgrade.
The African Peer Review Mechanism said it did not take Afreximbank’s decision into account in relation to the downgrade, stating that disagreements over the quality of Fitch’s “rationale, analytical framework, and interpretation of risk sources” were sufficient reasons to sever ties.
The African Union and some African countries say that the three major rating agencies—Moody’s, Fitch, and Standard & Poor’s—do not fairly assess lending risks in Africa, leading to higher borrowing costs.
All three agencies have denied any bias and stated that their ratings follow the same methodology across all continents. The African Export-Import Bank (Afreximbank), which specializes in trade and project finance, faces questions over whether it enjoys “preferred creditor status,” which would protect its loans to debt-distressed countries such as Ghana and Zambia from losses resulting from defaults.
Fitch has warned that any weakening of Afreximbank’s preferred creditor status could lead to future credit rating actions. Afreximbank is also rated by Moody’s, which downgraded its rating in July to two notches above “non-investment grade,” although the agency has never upgraded the bank based on its preferred creditor status.
