Mandatory ratings for interbank market bond issuers halted by PBOC

The People’s Bank of China, China’s central bank, has halted nearly all credit ratings requirements for businesses who deal in bonds and alternative debt financing tools on the interbank market, reports Caixin. The move comes as regulators seek to restructure the credit ratings industry amid issues around inflated rankings.

The halt on the need for an issuer rating will apply to all non-financial companies as part of a pilot program to promote the market-oriented reform of the industry, the People’s Bank of China (PBOC) said in a statement on Wednesday, reported Caixin. The interbank market is China’s main bond market, accounting for 86% of outstanding onshore bonds at the end of last year.

The move is the latest measure by financial regulators to shake up the sector and restore market confidence after a series of scandals and defaults of highly rated bonds exposed deep-rooted problems including inflated ratings and corruption. Investors have long complained that domestic ratings agencies award some companies high rankings they don’t deserve in order to secure clients and have failed to flag risks of default.