China to Tighten Regulatory Scrutiny of Credit Ratings Sector

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The Chinese central government has flagged further tightening of regulation surrounding providers of credit ratings.

The Chinese central bank, the Ministry of Finance and the banking and securities regulators have just jointly issued the draft version of the “Notice Concerning Expediting the High-quality and Healthy Development of the Bond Market Credit Ratings Sector” (关于促进债券市场信用评级行业高质量健康发展的通知(征求意见稿)) for the solicitation of opinions from the public.

The Notice outlines tighter requirements for credit ratings when it comes to standardisation, independence and quality control, with the goal of “strengthening the consistency, accuracy and stability of credit ratings results.”

The provisions cover five areas including:

  1. Strengthening the establishment of credit ratings methods, raising the quality and levels of distinctions.
  2. Improvements to corporate governance and internal controls, and maintaining the independence of credit ratings.
  3. Strengthening information disclosures and strengthening market restraint mechanisms.
  4. Optimising the credit ratings eco system, and operating a fair market environment.
  5. Strict supervision and regulation, and expanding the vigour of punishments for conduct in breach of regulations.

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