Zhou calls for domestic ratings agencies
By Feng Jianmin |
December 26, 2011, Monday
|
Print Edition
Print Edition
CHINA should trim its reliance on foreign rating agencies and develop the domestic rating industry to use a system different from current international convention, central bank governor Zhou Xiaochuan said yesterday.
Global investors are generally not satisfied with the top three global rating agencies after the sub-prime mortgage evolved into a global financial crisis because the agencies tend to exaggerate the positive factors in good times and neglect problems until it's too late, the governor of the People's Bank of China told a forum in Beijing.
"The opinion of some research institutions and experts may not be much wiser than others," Zhou said as he urged investors, especially large financial institutions, to make their own judgement.
He also said that some people have also questioned the procedure and models used by the global rating agencies.
China is trying to speed up developing a domestic rating industry as an alternative to the top three global rating agencies - Moody's, Standard & Poor's and Fitch - amid skepticism about their independence.
"The development of domestic rating agencies should be supported," Zhou said. "One possibility is to rule that one must use a rating from a domestic firm along with a foreign one when the domestic financial market and products are involved."
Some economists, however, doubt whether the government's interference can add credibility and transparency of domestic rating agencies.
"To reduce reliance (on rating agencies) and maintain independence of rating agencies are important measures to prevent risks (from occurring) in the financial system," said Mao Zhenhua, a professor at Renmin University of China.
"But if the government or regulatory bodies influence or even establish credit rating firms, the firms' creditability will only be diminished," he pointed out.
Global investors are generally not satisfied with the top three global rating agencies after the sub-prime mortgage evolved into a global financial crisis because the agencies tend to exaggerate the positive factors in good times and neglect problems until it's too late, the governor of the People's Bank of China told a forum in Beijing.
"The opinion of some research institutions and experts may not be much wiser than others," Zhou said as he urged investors, especially large financial institutions, to make their own judgement.
He also said that some people have also questioned the procedure and models used by the global rating agencies.
China is trying to speed up developing a domestic rating industry as an alternative to the top three global rating agencies - Moody's, Standard & Poor's and Fitch - amid skepticism about their independence.
"The development of domestic rating agencies should be supported," Zhou said. "One possibility is to rule that one must use a rating from a domestic firm along with a foreign one when the domestic financial market and products are involved."
Some economists, however, doubt whether the government's interference can add credibility and transparency of domestic rating agencies.
"To reduce reliance (on rating agencies) and maintain independence of rating agencies are important measures to prevent risks (from occurring) in the financial system," said Mao Zhenhua, a professor at Renmin University of China.
"But if the government or regulatory bodies influence or even establish credit rating firms, the firms' creditability will only be diminished," he pointed out.
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