Labuan International Business and Financial Centre (Labuan IBFC) has signed a memorandum of understanding (MoU) with RAM Rating Services, a Malaysia-based rating agency, that will see Labuan-based companies adopt RAM Ratings’ Labuan Entity Corporate Assessment (LECA).
LECA is a new customised rating service for companies based in Labuan IBFC that evaluates the performance and financial standing of Labuan entities. Where BAM ratings are traditionally assigned to debt securities in Malaysia, LECA ratings offer counterparty assessments or general financial performance evaluation of a company.
The benchmarks for LECA have also been adjusted to suit the specific midshore jurisdiction of Labuan, though the methodologies for assessing performance and financial standing are broadly aligned to the standard credit rating process.
LECA ratings are expressed using different scales and symbols to BAM’s other ratings, as they deploy different benchmarks to suit different uses or market needs, meaning LECA ratings may not necessarily equate to RAM’s traditional ratings for fixed income issues and issuers.
Several Labuan entities have already enquired about obtaining a LECA rating, RAM said.
LECA is available for re/insurers, banks and service providers and was launched in January 2021. It was developed in consultation with the Labuan Financial Services Authority (Labuan FSA), Labuan International Insurance Association, Association of Labuan Trust Companies, Association of Labuan Banks and Labuan Investment Banking Group.
Farah Jaafar-Crossby, chief executive officer at Labuan IBFC, said the domicile is keen to encourage intra-Labuan cross business links. “LECA will provide an independent first point of assessment between our reinsurance and banking license holders,” she said.
Jaafar-Crossby added: “As the jurisdiction is fast gaining global recognition, this is a coming-of-age for Labuan IBFC and our players. The benefits of transparency which LECA provides will assist us in enhancing our reputation as a transparent, well-governed midshore wholesale financial intermediation centre.”
Chris Lee Wai Kit, chief executive officer of RAM Ratings, said: “LECA ratings facilitate clarity, transparency and insights for confident decision-making between Labuan companies and their counterparts. Through this MoU, RAM hopes to contribute to the long-term resilience and growth of Labuan IBFC.”
Datuk Danial Mah Abdullah, director general of Labuan FSA, said the LECA assessment will certainly add to the maturity of Labuan IBFC’s midshore wholesale financial ecosystem and enhance its resilience.
Labuan IBFC is home to almost 1,000 global licensed entities.
Labuan IBFC, RAM Rating Services, LECA, Farah Jaafar-Crossby, Chris Lee Wai Kit, Datuk Danial Mah Abdullah