Thomas Murray, the specialist custody rating, risk management and research firm announces the issue of a Public Depository Rating to Depsito Central de Valores SA (DCV), the Chilean Central Securities Depository. DCV has been awarded a Public CSD rating of “A+,” which represents low overall risk.
The A+ rating as assigned by Thomas Murray recognises the strong procedures and controls applied within DCV in order to minimise risk for market participants. The outlook has been assigned as Stable which indicates that there are no imminent developments that may change the rating at this stage.
DCV is the sole depository for all eligible securities in Chile. It operates on a for-profit basis and is owned by the major banks (30 %), stock exchanges (29%), pension funds (30%), insurance companies (10%) and others (1%). DCV provides settlement and custody services for Chilean securities held with it. In addition to its domestic operations, DCV has developed a link with the Depository Trust Company (DTC), the US Central Securities Depository, to enable participants to move cross-border securities electronically or physically since 2008.
DCV has established a solid financial foundation through consistent profitability in recent years and broad insurance coverage for its operations. It has a well established internal audit department, which audits operational controls and is audited by several external organisations including Deloitte, which is appointed by the Surveillance Committee, a committee which is established under law as an independent group with responsibility for providing oversight of DCV’s operations on behalf of its participants. This group is completely independent of management and is allocated its own budget to undertake reviews and audits of DCV as and when it requires.
A SAS-70 report has also been undertaken by Ernst and Young, the results of which have recently been published.
DCV has developed disaster recovery arrangements – it operates two alternative parallel IT sites where the capability exists to automatically transfer processing from one centre to another without any disruption to service. Also, it is currently in the process of dividing its staff into separate locations which, among other things, will provide an enhanced business recovery capability in the event of a physical disruption to operations at one of its sites, as these two sites will be in separate parts of the city.
The Chilean market operates in a predominantly dematerialised environment due in large part to the efforts of DCV in working with the community to immobilise and dematerialise its market’s securities.
Thomas Murray is pleased to have assessed Depsito Central de Valores SA’s existing operations and its risk management processes and announce the public rating for DCV. The review determined that DCV had implemented good risk management controls. Like most markets, the Chilean capital market will face new challenges for which DCV is well-placed to provide support should its shareholders and participants so direct. The current rating and the review process will assist DCV in this quest, says Simon Thomas, CEO and chief ratings officer, Thomas Murray.
“The management and Board of DCV is pleased to have worked with Thomas Murray in order to obtain an independent view of our existing capabilities and processes. The rating process involved a thorough review of DCV’s operations process and the A+ rating demonstrates that DCV is in a strong position to support Chile’s capital markets,” says Fernando Yanez, general manager, DCV.
The Central Securities Depository rating assesses the risk exposures for investors associated with the processes the CSD has in place to facilitate the safekeeping and the clearing and settlement of securities, where applicable. It assesses six key risks. The methodology considers the capabilities of the depository and the quality and effectiveness of its operational infrastructure.
It also assesses the depositor’s willingness and ability to protect its participants or clients from losses. As part of the rating, the scope and quality of the depository’s services is assessed. The ratings are on a consistent global scale, using the familiar AAA to C ratings scale. Once the rating is assigned there is an ongoing surveillance process to monitor the depository.