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Crisil to review ratings for FII units in India

Almost 27 GFI subsidiaries have their rating above the sovereign ratings of India, deriving their strength from their parents abroad, reports BS Srinivasalu Reddy.
Hindustan Times | By BS Srinivasalu Reddy, Mumbai
UPDATED ON MAR 19, 2008 09:08 PM IST

Indian subsidiaries of global financial institutions (GFIs) could get lower rating than India’s sovereign rating with rating agency Crisil set to reassess their ratings in the wake of turmoil in the global financial markets, which has led to a weakening of parental ability to support subsidiaries abroad.

Almost all of the 27 GFI subsidiaries in the country have their rating above the sovereign ratings of India (BBB — or just investment grade), deriving their strength from their parents abroad.

“These ratings (under revision) incorporate the expectation of support being available from the respective parents should the need arise, and are therefore linked to the ratings of the global parents,” the rating agency said in a release on Wednesday.

Speaking to the Hindustan Times, Raman Uberoi, senior director, Crisil Ratings, said, “Most of these ratings of GFI subsidiaries are above India’s sovereign ratings. Now as part of our continuous surveillance based on the Crisil scale, we are initiating the process of examining several aspects reflecting the recent developments in the fglobal financial markets.”

Several financial market biggies in the US and Europe have reported huge losses out of their investments in derivative instruments arising out of sup-prime mortgage loans in the US, with some majors like bear Sterns and Countrywide going down altogether. These include large banks, brokerages, investment banks which reported a huge mark-to-market (a method of valuing investments based on present market values) losses.

Global financial major that have multiple subsidiaries in India include ABN AMRO Bank, Citigroup, Deutsche Bank, DSP Merrill Lynch, GE and Standard Chartered Bank.

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