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Fitch: Robust Financial Management is Credit Strength in LRGs
December 17, 2015 / 10:45 AM / 2 years ago

Fitch: Robust Financial Management is Credit Strength in LRGs

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Assessment of Financial Management: In Local and Regional Governments here BARCELONA/MILAN/LONDON, December 17 (Fitch) Fitch Ratings says in a newly-published special report that robust management practices and policies can add stability to weak local and regional government (LRG) credits, maximising their credit rating potential. Conversely, weak financial management can negatively affect even the strongest economies and local government structures. In extreme cases, poor management can cause rating downgrades and, on rare occasions, missed debt service payments. Recognition of management practices, rather than merely managers, helps provide an objective means to assess management impact on the credit analysis of LRGs. Fitch considers financial management as key in the effective operations of a subnational. In some countries, LRGs are run as "corporations" and have the same level of control and reporting as a company. But in others they are administrative units with limited sophistication. Management can be assessed as being 'pro-active', whereby they are fully aware of the risks that they are undertaking or could face, have clear reporting lines and internal controls in place and can adjust to changes promptly. 'neutral' assessment would reflect some shortcomings, for example accounting policies may be limited or debt management less sophisticated while 'passive' would underline limited debt management culture or investment policies, rudimentary accounting policies and deficient reporting lines. Management policies can cover many areas including budget planning, debt management, control and oversight as well as transparency and accounting. All these aspects are discussed in the report. The special report, entitled "Assessment of Financial Management in Local and Regional Governments", is available at or by clicking on the link above. Contact: Fernando Mayorga Managing Director +34 93 323 8407 Fitch Espana SAU Paseo de Gracia, 85 08008 Barcelona Raffaele Carnevale Senior Director + 39 02 87 90 87 203 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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