I would like to express my sincere thanks to those who tirelessly work to provide aid and support in our community as we continue with our work to deal with the impact of the COVID-19 pandemic.
Many persons have been negatively affected and I wish to extend my heartfelt sympathy to those who have recently lost loved ones or have experienced other tragic losses. Our commitment to assisting in whatever ways we can, remains unwavering.
I am pleased to advise you of information highlighted in a recent press release published by Moody’s Investor Service (“Moody’s”), to announce the completion of a periodic review of the Bermuda Government ratings. In general, their review sheds a positive light on Bermuda, and the efforts made by this Government to navigate the country through the current pandemic and to build for the future.
Their report echoes the same sentiments as their annual credit analysis, published earlier in the summer, which also speaks favorably of the Government’s stewardship during these turbulent times. This marks the second time in three weeks that I have been able to announce encouraging news from a credit rating agency after having reported on October 12th of the favorable assessment by Kroll Bond Rating Agency’s (“KBRA”).
The periodic review released in late October by Moody’s is published for information only and does not announce a rating action. However, it reiterates the key conclusions reached from their most recent action, which was published on July 2, 2021. As a result of that review, Moody’s affirmed Bermuda’s A2 issuer and senior unsecured bond ratings, along with a stable outlook.
This rating affirmation, which confirmed that there is no change in rating since a similar review was done last year, once again indicated that Bermuda’s bonds are seen to be of good quality with a low credit or default risk. In the July 2021 annual credit analysis, it was noted that Bermuda’s ratings were underpinned by the country’s very high levels of wealth, strong institutions and regulatory framework and commitment to prudent fiscal policy.
The stable outlook reflected their assessment of policymakers’ continued commitment to a prudent fiscal stance that will contribute to stabilizing Bermuda’s debt burden in the next 2 – 3 years, following the significant economic shock experienced in 2020 as a result of the coronavirus pandemic.
The Moody’s analysis specifically spoke to the fact that the Ministry of Finance released the Economic Recovery Plan in March 2021 to boost economic growth and equity in the island, and that the plan shapes Bermuda’s fiscal and economic priorities. Continuing their commentary on the economy, it was reported that “Bermuda’s low-tax regime and a business-friendly environment, enhanced with a robust regulatory framework of international standards, contribute to its status as an important global insurance center.”
It also mentioned that the development of hotels such as St. Regis, which opened in May 2021 and has so far employed over a hundred local hospitality workers, will increase room capacity on the island and boost overall tourism performance in the years to come.
In relation to the Government’s fiscal strength, the Moody’s analysis states, “The current Progressive Labour Party government has maintained fiscal consolidation, which allowed Bermuda to keep debt metrics relatively stable.”
The public should take note that this was accomplished despite significant economic contraction and higher crisis-related spending adding increased pressure on Bermuda’s debt burden. The report further emphasizes that Bermuda’s debt burden continues to be in line with that of A-rated peers, and it is also expected that Bermuda’s fiscal performance will remain stronger than that of related peers.
Moody’s October 2021 periodic review repeats many of the same statements that were written in the agency’s July 2021 annual credit analysis. It highlights the strength of Bermuda’s institutions and governance, reflecting a strong institutional framework, and a fiscal policy track record that built credibility by arresting the deterioration of the government’s finances in the context of adverse economic conditions. Overall, both reports reflected positively on Bermuda and the fiscal management approach being taken to shape the direction that our country is heading.
It is gratifying to see that similar themes have been highlighted in the rating agency reviews that have been published this year on Bermuda, whether by S&P, Moody’s or KBRA. As I mentioned in my press statement on October 7th, these rating affirmations will help allow Bermuda to continue to have access to capital at relatively favorable rates. The assessment by Moody’s further affirms the Government’s approach to the management of fiscal matters and its future program in that regard. We look forward to progressing Government’s plans to, in a fiscally prudent and considered manner, strengthen the economy; reduce our debt; assist our people; and create employment opportunities. Although the pandemic may continue to present challenges in our recovery efforts, the Government is determined to position Bermuda to prosper in the long run.
In light of the foregoing, I believe that it is also important, at this time, to address the article that appeared in the Royal Gazette recently (October 20th). The article was entitled, as it appeared online, “OBA raises doubts about use of Kroll Bond for Bermuda Report”. In this report, the leader of the opposition and shadow Finance Minister is credited with making several quotes in relation to KBRA’s review of Bermuda’s debt, which I highlighted in my press conference on October 12th. I would like to specifically refer to a few of them.
The first quote that I will mention is as follows, “The question floating around Bermuda’s financial community is, who is Kroll Bond Rating Agency (KBRA)? Where did they come from?”
In response, I would note that KBRA rated their first transaction in 2011 and to date have issued 48,000 ratings across 3,400 entities. KBRA rates several countries including the US, Canada, the UK, Japan, Mexico and Bermuda. KBRA also rates Lloyd’s of London whose CFO, Burkhard Keese, has specifically recognized the agency in comments noted in a Lloyds.com article dated April 22, 2021. The article, entitled, ‘Lloyd’s appoints new rating agency and receives AA- financial strength rating’ attributes the following statement to Mr. Keeses, “We are delighted to appoint Kroll Bond Rating Agency and add an AA- stable outlook rating to sit alongside our financial strength ratings from our existing agencies. We believe it is important to have a diversity of views in the ratings market and welcome KBRA as a new entrant that will provide a fresh perspective on Lloyd’s”.
The article detailing the Opposition Leader’s comments on KBRA also addressed additional issues, for which I believe it is important to provide clarification. In this regard I refer to the following: “What made KBRA so attractive to the PLP Government that it would spend even more money for its rating and how much more credibility did it buy? There is more to this credit assessment than meets the eye.”
A further related quote is “so why are we deviating from our long relationship with the gold standard of international credit rating agencies; agencies that are intimately familiar with Bermuda’s unique economic model?”
In response, I must clarify that KBRA is not compensated by the Bermuda Government for the surveillance report that they produce for our country.
KBRA approached the Government in 2018 to start producing annual sovereign ratings, as they were already providing ratings for several Bermuda-based companies, including insurance/reinsurance companies and other financial institutions.
As they rate several companies operating in and from Bermuda, they believed it is prudent to rate the country as well. Regarding the second quote, the reference to the gold standard of international credit agencies was presumably meant to refer to Moody’s and S&P, with whom Bermuda has had long-standing relationships.
I would highlight that Bermuda has certainly not severed our relationship with either of them. Those two agencies still rate Bermuda annually, as per normal. In fact, I reported in the House on May 7th 2021, on the generally positive report from S&P and now, in today’s press conference, we are also providing this update on the Moody’s assessment.
Therefore, although not solicited, the Government welcomes the diversity of independent feedback that KBRA represents. Additionally, I would again emphasize that all the rating agencies have expressed similar support for the prudent and balanced approach that this Government is taking to manage the economy, through what is for all countries around the globe, an extremely challenging time.
There is one further section from the article criticizing the publication by the Government of KBRA’s positive review, that I would like to speak to. In this section the following quote is attributed to the Opposition Leader – “Could it be that KBRA was the only credit rating agency who was willing to help the Government showcase its fintech and digital commerce industries? Stay tuned. There is more to this appointment and we await the details.”
To reply to this, I would like to quote three sentences from the July 2, 2021, Moody’s annual credit analysis. These are: “The Government also continues to develop its fintech sector on the island, using its strong regulatory framework to become an incubator in this globally developing sector. The regulator maintains high standards to protect its world-renowned reputation.
If the fintech sector becomes successful, it will likely help diversify the economy, building on Bermuda’s established financial sector.” Given the focus globally on digital and fintech matters, and Bermuda’s own work in this regard, it is to be expected therefore that all reputable rating agencies will carry out an assessment in this area. It is noteworthy that the conclusions reached by Moody’s in this regard are not dissimilar to the relevant views also expressed by the Kroll Bond Rating Agency.
In summary, I would therefore note that KBRA is a quality and reputable rating agency and it is noteworthy that KBRA are not the only rating agency to see potential and value in the Government’s work to stabilize, strengthen and grow the economy, as well as to endorse the sound and prudent fiscal approach being taken by Government. Similar conclusions have also been reached by S&P and Moody’s.
As I conclude this statement, I would once again like to express my thanks to the Ministry of Finance team, and all of those in the public and private sector who are working with us, as we seek to effectively manage Bermuda’s fiscal affairs, and to “get the word out” on the impact of that work. Ensuring that the public gets the facts around Bermuda’s ratings is important. As I have previously stated, Bermuda’s credit ratings are critical when it comes to our ability to borrow money at favorable rates and are also relevant to the companies who operate from and within Bermuda. They also are key to the continued strength and growth of our economy.
Therefore, we will continue to do what is necessary, with the support of the people of Bermuda, to maintain and strengthen these ratings in a way that helps to secure a brighter, better tomorrow for all.
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