China has suspended one of its top credit rating agencies after a former executive was accused of taking “massive” bribes, as a growing pile of defaults rattle the country’s $4 trillion corporate debt market, reported the Financial Times.
The China Securities Regulatory Commission announced on Tuesday that it was temporarily freezing the license of Golden Credit Rating and had forbidden the agency from taking on new business for three months.
The securities regulator on Tuesday said Golden Credit had failed to justify some of its credit ratings and upgrades. It ordered the agency to “immediately carry out a comprehensive rectification . . . strengthen internal controls and compliance management, strictly police business practices and improve the quality of ratings”.
China’s credit rating agencies have been criticized for standing by their triple A ratings for troubled state-owned companies in the face of the defaults, said the FT. “Most private investors do not take credit ratings seriously as the system does a bad job in measuring risks,” said a former executive at a large credit rating agency in China.