The China Securities Regulatory Commission finally signalled on Friday that it understood what bond market participants have long known that the country’s local credit rating agencies aren’t very good.
The securities watchdog announced it had been investigating seven domestic agencies since September and had sent warning letters to six of them, asking representatives to attend “supervisory interviews”.
The CSRC’s indictment was damning. It highlighted nine major flaws in the companies, including a lack of standardised criteria for ratings, different rating methodologies from those disclosed, and a lack of adequate due diligence on the ratings.
The candour of its critique was long overdue...