The Brics (Brazil, Russia, India China and SA) nations agreed on Sunday to fast-track the setting up of their own credit ratings agency to better cater to developing economies, rivalling existing ones based in the West.

Indian Prime Minister Narendra Modi said they agreed to move ahead on the ratings agency, although there was no timetable announced.

“To further bridge the gap in the global financial architecture, we agreed to fast-track the setting up of the Brics credit rating agency,” Modi said.

“In the past year, Brics have played an active role in shaping the global agenda for change and development,” he said.

Modi was speaking at a summit in the Indian resort of Goa, where he was hosting the leaders of Brics.

The prospect of a new agency comes amid accusations from within the bloc that the three traditional agencies – Moody’s, S&P Global Ratings and Fitch – are all western-based and favour those economies. The three, together, account for 90% of the global ratings market.

Plans for the agency follow the establishment of a Brics bank 12 months ago with an initial capital of $100bn, which has been seen as a challenge to western-based institutions.

“The existing credit ratings agencies from developed countries are behind the curve on developments in emerging economies,” Indian Economic Affairs Secretary Shaktikanta Das said.

“There is a need for a new ratings agency sponsored by the Brics countries or their institutions located in Brics countries. But the ratings agency has to be autonomous of the governments and should maintain arm’s-length distance from them.”

Emerging economies claim western ratings companies are biased, optimistic on developed nations and pessimistic on developing ones.

Russia, in particular, and China have been perturbed by the western ratings firms.

SA, hovering precariously just above junk status, is expected to host the ratings agencies from November until early December. Fears are that the country could slide into the junk status by the end of 2016, which could make borrowing more expensive.

Sunday’s resolution to speed up the creation of the ratings agency was, however, not without its own hurdles. According to Indian e-paper Live Mint, a day before the weekend summit got under way, China had indicated that it was not in favour of the proposed agency.

“China is now saying a government-backed credit ratings agency will not have any credibility and Brics should stay away from it.

“But the item is on the agenda of discussion of Brics leaders,” said a finance ministry official who spoke on condition of anonymity.

On September 26 Mint reported that the new agency would adopt an investor-pays model: prospective investors would pay for rating an issuer of a debt instrument. Under the present pricing model, the company or institution issuing bonds pays a rating agency to be rated, which is known as an issuer-pays model.

Chinese President Xi Jinping said on Sunday that a rising tide of protectionism and antiglobalisation was a danger to the world economy’s fragile recovery. The Brics leaders vowed to forge closer business and trade ties and to fight tax evasion.

They also agreed to work together to combat “cross-border” terrorism, but Modi’s guests held off from signing up to his fierce condemnation of India’s arch-rival, Pakistan, as the “mothership of terrorism.”

Both Xi and Modi said the group must stick together, insisting there was much to remain positive about even though its members have been beset by domestic woes and problems sparked by the 2008 financial crisis.

Brics was formed in 2011 with the aim of using its members’ growing influence to challenge western hegemony. The nations have a joint estimated GDP of $16-trillion and account for 53% of the world’s population. (AFP)

•Photo shows Indian Prime Minister Narendra Modi.

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