China’s response to the issues within its domestic marketplace recently has been well covered here in Financial Regulation Matters (like here and here ) so I will not go into the background too much in this short post. However, the most recent posturing from the collected regulatory framework in the country reveals, in perhaps its most obvious form, why a regulatory framework (and not just China’s) is only even a robust façade on top of underlying and societally fundamental truths.   What do I mean by this last sentence? Well, let us start by considering the recent statements made by five of the country’s top financial regulatory bodies. The five bodies – the central bank, the finance ministry, the national economic planner, the securities regulator, and the banking and insurance regulator – have all teamed up to declare that the new regulatory approach will be to shift the burden onto the domestic agencies with the aim being to ‘ guide them to see reputation as the basis of...

Our friends at CountryRisk , via their Chief Economist Moritz Kraemer , have recently published a study that examines the rating actions of the leading credit rating agencies since the onset of the COVID-19 pandemic. Perhaps unsurprisingly, the results show a marked bias towards the developed world and against the developing world.   The issue of the rating agencies reacting more harshly to the world’s poorest countries has been examined on a number of occasions in the credit rating literature (see here , here , and here ) so it comes as no surprise to hear that the existence of this bias during the COVID-19 crisis is of interest to onlookers, and it is indeed very welcomed. The study, which can be found here , and was picked up by Reuters and dissected here . It aimed to compare how the Big Three rating agencies (S&P, Moody’s, and Fitch) have reacted to the crisis and how their decisions have played out in relation to the world’s poorest and richest countries. It finds tha...

As an update to the last post here in Financial Regulation Matters that examined the pressure being piled onto the Chinese rating agencies by the state apparatus, today’s short post looks at further pressure coming from the ‘private’ sector within the Country.   Yesterday, the Securities Association of China (website available here in Chinese and here in English) – a private, non-profit organisation that was formed in 1991 and is under the ‘direction’ of the China Securities Regulatory Commission (CSRC) – produced its quarterly report and the content was damning for the domestic credit rating agencies. We have already discussed how the State is turning on the domestic industry in reaction to the widespread issues facing issuers in the country, with a number of high-profile defaults hitting the headlines. The report discusses the apparent deficiencies within the agencies , ranging from ‘insufficient disclosure’ to ‘weak inspection’ mechanisms, which it argues negatively affe...

We saw at the end of 2020 that Chinese credit rating agencies were coming in for unprecedented criticism in the light of a number of high-profile corporate defaults. With the entrance of the international credit rating agencies into the Chinese marketplace, the pressure was already ramped up against the domestic players. However, as the corporate bond arena within China continues to suffer, now the dominant Chinese regulator is taking its turn in, potentially, disembowelling the domestic rating space.   On Friday, the China Securities Regulation Commission (CSRC) published some revised rules concerning the registration of corporate bonds. The original rules stated that those wanting to issue bonds for investment had to demonstrate the riskiness of those bonds by gaining a credit rating from a domestic supplier. Now however, the CSRC has done away with this requirement, instead stating that, as part of the registration requirements, there would now be minimal thresholds that a c...