Credit rating agency Moody's has given up the regulatory licence of its South African subsidiary to focus on serving cross-border investors and African issuers looking to attract international funding.

The move by Moody's is part of adjustments to its business model, and it will continue to rate South African issuers from other locations.

It is not expected to affect how Moody's rates South Africa's sovereign credit.

South African banks use credit ratings from recognised agencies like Moody's to determine their minimum required regulatory capital and reserve funds for credit risk.

A notice by South Africa's market conduct regulator, the Financial Sector Conduct Authority (FSCA), dated April 16 said: "Moody's Ratings-SA informed the Authority that it no longer wants to be registered as a credit rating agency in terms of the Act and that it is renouncing its registration".

The notice said the Prudential Authority, which regulates banks, had requested an extension to the period in which local banks can still use ratings issued by Moody's Ratings-SA for regulatory purposes.

"The Authority has considered the request and decided to extend the period to 24 months," the notice added.

In a separate notice dated April 21, the Prudential Authority informed banks that it intends to derecognise Moody's Ratings-SA as an eligible external credit assessment institution.

Asked for comment, a Moody's spokesperson said the agency would "support our customers with a relationship management presence from our office in Johannesburg," in line with its approach in markets across Asia and Latin America.

The spokesperson said Moody's saw significant long-term growth potential in Africa, as shown by its acquisition of pan-African agency Global Credit Rating Company, which helps issuers raise capital in domestic debt markets.