By Yin Lei
China took a substantive step on Tuesday to unify the regulation and supervision over credit rating agencies that operate at its two domestic bond markets.
At present, credit rating agencies in China follow two sets of standards for their qualifications and performances, which may breed regulatory loopholes and speculative activities.
At the interbank bond market, a credit agency’s qualification is reviewed by the People’s Bank of China (PBOC), the country’s central bank, and the National Association of Financial Market Institutional Investors (NAFMII), while the China Securities Regulatory Commission (CSRC) decides whether such an agency is qualified to enter the bond markets in Shanghai Stock Exchange and Shenzhen Stock Exchange.
This situation is set to be changed after a PBOC announcement on Sept. 11.
According to this announcement, a credit rating agency with business operations in one of the above two types of markets can apply to operate in both of them. After such an application, its qualification review will be done under a fast track jointly set up by the PBOC, the CSRC and the NAFMII.
The announcement also encourages different rating agencies overseen by the same actual controller to get merged and restructured so that they can concentrate more talents and technology resources to become stronger. The new rating entities formed this way should follow the same set of methods, norms and standards in their business operations to ensure the consistency and comparability of their rating outcome.
The PBOC, CSRC and other industry associations, which are responsible for supervising and inspecting the credit rating agencies at home, will share information with each other on these agencies’ management records and irregularities.
