The African Union (AU) rating agency warned on Tuesday (27) that Fitch Ratings risks “misinforming investors” if it continues to issue credit ratings on the African Export-Import Bank (Afreximbank) after the banking institution severed ties with the agency, known as one of the “Big Three.”
Afreximbank announced the decision on Friday (29), citing concerns about the quality of the agency’s approach.
In response, in a statement issued on Monday, the AU’s African Peer Review Mechanism (APRM) said it considered Afreximbank’s decision justified.
“Any future ratings issued by Fitch in relation to Afreximbank would be unsolicited and non-participatory, and therefore run the risk of misinforming investors,” the APRM said in the statement.
Fitch declined to comment on the APRM’s position.
In June, the agency downgraded Afreximbank’s credit rating to one notch above junk status, citing high credit risks and weak risk management policies, and placed it on “negative outlook” – the agency’s terminology that warns of a possible further downgrade.
APRM stated that it did not consider the bank’s decision related to the downgrade, explaining that disagreements over the quality of Fitch’s “justification, analytical framework, and interpretation of risk sources” were sufficient grounds for severing ties.
The African Union and some African countries claim that the so-called “Big Three” rating agencies—Moody’s, Fitch, and S&P Global Ratings—do not fairly assess the risk of lending in Africa, driving up financing costs. The three institutions deny bias and say their ratings follow the same formula across all continents.
Afreximbank, which specializes in trade and project finance, faces questions about whether it has “preferred creditor status,” which would protect its loans to debt-stricken countries such as Ghana and Zambia from losses on debt defaults.
Fitch has warned that any weakening of Afreximbank’s preferred creditor status could lead to future downgrade actions.
