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BEIJING (Reuters) – China decided to tighten its review of its credit rating business on Sunday, releasing draft rules aimed at bolstering an industry long accused of inflating ratings in the corporate bond market in China. country of 4.4 trillion dollars.
Chinese credit rating agencies urged to improve their credit rating models, strengthen corporate governance and strengthen information disclosure, according to rules jointly issued by five government agencies, including the central bank and the Ministry of Finance.
The rules are also designed to create a better ecosystem in which bond issuers do not interfere with credit rating decisions, investors rely on multiple rating sources, and regulators lower the credit rating bar. required for certain types of bond investors, the People’s Bank of China said in a statement on its website.
The rules will shift more of the burden on rating agencies, and “guide them to see reputation as the basis of their very existence,” the statement said.
China has stepped up the opening of its giant bond market to foreign investors. Beijing has also deregulated the country’s credit rating market in favor of global players such as S&P Global Ratings and Fitch Ratings.
But China’s bond credit rating has long been a source of complaints for investors.
Late last year, China’s bond regulator signaled the risk of inflated credit ratings and widespread rating industry failures, after failures of highly rated state-owned companies triggered market panic.
The rules released on Sunday urge rating agencies to strengthen the consistency, accuracy and speed of credit scoring, and to put in place a quality inspection system using the default ratio at the core.
Rating agencies are also encouraged to install independent directors and invited to take measures to avoid conflicts of interest and strengthen internal control.
Government agencies that jointly issued the rules also include the National Development & Reform Commission (NDRC), the China Securities Regulatory Commission (CSRC), and the China Banking and Insurance Regulatory Commission (CBIRC).
(Reporting by Samuel Shen and Ryan Woo; Editing by Michael Perry)
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