South African Regulators Move to De‑register Moody’s Local Rating Unit
The Prudential Authority (PA) has informed South African banks that it intends to de‑register Moody’s Investors Service South Africa as an Eligible External Credit Assessment Institution (ECAI). The notice, dated 21 April 2025, follows a decision by the Financial Sector Conduct Authority (FSCA) on 16 April 2025 to cancel Moody’s registration as a credit rating agency under the Credit Rating Services Act.
Why the Registration Is Being Withdrawn
According to the FSCA’s notice, Moody’s Ratings‑SA informed the regulator that it “no longer wishes to be registered as a credit rating agency for the purposes of the [Credit Rating Services] Act” and that it waives its registration. The FSCA consulted the PA before proceeding, as required by Section 6(1) of the Act, because the ratings issued by Moody’s Ratings‑SA are used in the PA’s supervisory and regulatory work.
The PA’s notice clarifies that the de‑registration will take effect 24 months after the FSCA notice was published, giving banks a transition window that runs to approximately April 2027.
What This Means for Banks and Issuers
During the 24‑month period, banks may continue to rely on Moody’s Ratings‑SA external credit ratings for regulatory capital calculations. After that date, the ratings will no longer be permissible for prudential purposes under the Banking Act, which requires that any ECAI used for capital calculations have prior written authorization from the PA.
Importantly, the move does not affect:
- South Africa’s sovereign rating, which remains assigned by Moody’s Investors Service’s global team;
- Ratings of local issuers produced by analysts based outside South Africa; or
- The operational presence of Moody’s Johannesburg office, which will continue to support cross‑border clients.
Moody’s Strategic Response
A Moody’s spokesperson told Business Day that the agency will shift its focus to serving cross‑border investors and African issuers seeking international funding. The Johannesburg office will maintain a relationship‑management presence, mirroring Moody’s approach in Asia and Latin America.
The spokesperson highlighted Moody’s investment in GCR (Global Credit Ratings), a pan‑African ratings agency with analysts in South Africa, Nigeria, Kenya, Senegal and Mauritius. Over the past three years, this partnership has supported GCR’s growth and is expected to help deepen transparency in domestic debt markets.
Broader Regulatory Context
South Africa is a member of the Basel Committee on Banking Supervision and permits the use of external credit ratings to determine banks’ minimum regulatory capital and reserve funds for credit risk. Only ratings issued by agencies recognised as ECAIs by national supervisory authorities may be used for this purpose.
The Credit Rating Services Act allows a three‑month grace period after a rating agency’s registration is cancelled, extendable by another three months to mitigate market disruption. The FSCA exercised this flexibility, extending the period to 24 months to safeguard financial stability while banks adjust their internal models.
Recent Rating Actions on South Africa
In its December 2024 assessment, Moody’s Investors Service kept South Africa’s sovereign rating at Ba2 with a stable outlook. By contrast, S&P Global Ratings raised the foreign‑currency rating to BB (from BB‑) and the long‑term local‑currency rating to BB+ (from BB) earlier in 2024, citing signs of economic progress. Fitch affirmed the country’s BB rating with a stable outlook in September 2024.
Analysts note that Moody’s stance appears more cautious than its peers, though the agency continues to monitor the impact of geopolitical events—such as the Middle‑East conflict—on South Africa’s economic metrics ahead of its May 2029 review.
Conclusion
The PA’s forthcoming de‑registration of Moody’s Ratings‑SA marks a procedural shift rather than an immediate market shock. Banks have a two‑year window to adapt their capital models, while Moody’s re‑orients its South African operations toward international‑facing activities. Continued cooperation between regulators, rating agencies, and market participants will be essential to maintain transparency and stability in South Africa’s financial system.
