Chinese regulators are preparing to introduce new rules to prevent conflicts of interest in the credit ratings industry following a scandal involving one of the country’s largest ratings agencies last year, Caixin reports.
The new rules, proposed by the National Association of Financial Market Institutional Investors (NAFMII), a body backed by the People’s Bank of China, aim to promote impartiality and independence among credit ratings firms and would ban companies that violate these regulations.
Domestic ratings firms have long been criticized for giving high scores to local issuers. Of the 25 companies that defaulted last year, 10 did not have their risk score downgraded before their default and six were given scores of AA+ the year before, according to MAFMII.
Last year, Dagong Global Credit Rating Co. was banned from the market for a year after regulators found that the company was charging enormous consulting fees to companies to which it had also given high rating scores.