S&P: Blockchain could change the rating of credit financial institutions.
Standard & Poor’s Financial Services LLC (S&P) is an American financial services company. It is a division of S&P Global publishes reports on financial research and analysis of stocks and bonds. S & P is known for its stock indexes such as the US S&P 500, the Canadian S&P / TSX, and the Australian S&P / ASX 200.
S&P is considered one of the three rating larger credit agencies along with Moody ‘s Investors and Fitch Ratings, accumulating between the three market share of 95% in 2013.
Standard & Poor’s (S&P) Global recently published a report detailing its view of blockchain technology. The credit rating agency also revealed how blockchain development could change its credit ratings of financial institutions.
In a new report entitled “The Future Of Banking: Blockchain Can Reshape The Financial System?” S&P acknowledged blockchain‘s impacts on financial institutions. It noted that the rising investment in the technology “suggests that a transformation of the global financial industry could be underway.” This report is published by S&P Global Market Intelligence, a division of S&P Global.
On the other hand, the report states that since blockchain is still in an early stage of development, “it is not clear what impact it may have on our ratings in the industry.” Due to factors such as consensus requirements among market participants and regulatory approval, “market-wide adoption is a long way off,” according to S&P.
“The Blockchain technology could play a role in our analysis if we believe that the technology marginalizes certain business models or enables a company to develop a distinct competitive advantage.” the agency said S&P.
The company is also closely monitoring blockchain development which “could consider rating changes if its widespread implementation occurs faster than we currently expect.” Companies whose ratings will be impacted are those with operating models that will be significantly changed by blockchains.
Overall, S&P recognizes the benefits of technology. “We believe that, at the very least, blockchain presents an opportunity for financial institutions.”the report says.
The technology can streamline back-office operations which would cut costs. It will also shorten settlement times, facilitate payments and even generate new revenue streams, as suggested by S&P. The company expects larger financial institutions to start using blockchains over the next two years but in a narrow context.
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