PBOC Issues Directive to Drive Development of Credit Ratings for Chinese Bond Market

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The Chinese central bank has led the issuance of a new directive to further drive the growth of credit ratings agencies for the domestic bond market.

The “Notice Concerning Expediting the Healthy Development of the Bond Market Credit Ratings Sector” (关于促进债券市场信用评级行业健康发展的通知) was issued on 6 August by a slew of China’s top financial authorities, including the People’s Bank of China (PBOC), the National Development and Reform Commission (NDRC), the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC) and the Ministry of Finance (MOF).

The Notice calls for “strengthening and optimising the ratings ecosystem and strictly regulating and managing credit ratings organisations.”

The Notice also makes a slew of new requirements for credit ratings agencies from the perspective of “strengthening the establishment of ratings methods, improving corporate governance and internal control mechanisms, and strengthening information disclosures.”

“As key foundational systems for the bond market, the credit ratings sector plays a key expediting role in driving the rapid growth of the Chinese bond market, and already has an initial scale,” said PBOC’s official news outlet.

“However it’s hard to overlook that in recent years the credit ratings agency has suffered from a number of problems, in particular an increase in the default of highly-rated bonds, inadequate ratings demarcations and weak risk warning capability.”

“The release of the Notice fully indicates the high level of importance that regulatory authorities place on the healthy, high-quality development of the credits rating sector” said an analyst from Golden Credit Rating International.

“This is a key strategic move by regulatory authorities for reform of the credit ratings sector, and further clarifies the direction of reform for the credit ratings sector. It has major significance for expediting the healthy development of the ratings sector, as well as the bond market.

“In future, following the implementation of relevant reform measures, the credit ratings sector will enter a new developmental situation of ‘marketisation’ and ‘strict regulation,’ which will help drive the credit ratings sector to pragmatically play its role as ‘watchmen’ of the capital market.”



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