Following a slew of bond defaults at highly rated mainland companies, Chinese regulators have suspended the operations of Golden Credit, a top rating agency in the country.
State-owned Golden Credit Rating will be suspended from issuing new securities ratings for three months, according to regulators, after it generated 263 million yuan ($40.2 million) in revenue last year.
This follows charges against Jin Yongshou, a former general manager of Golden Credit Rating International, and Cui Runhai, an ex-general manager at the firm's Jiangsu-based branch, over illegal assistance of unidentified companies for «massive [financial] gain,» according to a statement from China’s top anti-graft agency.
The two executives also previously worked at Dagong Global Credit Rating which was also suspended from issuing ratings for a year in 2018 after it was spotlighted in a similar scandal where it was found overcharging rated firms for counseling. Cui was detained by the watchdog in early January while Jin turned himself in just a few days later, the statement added.
Unreliable Credit Ratings
Earlier this month, Chinese regulators called out the mainland credit ratings for excessive upgrades in the midst of ongoing economic turmoil and bond defaults. According to China’s National Association of Financial Market Institutional Investors (NAFMII), a self-regulatory industry body under the central bank, there were 90 rating adjustments during the last quarter of which there were 54 upgrades and only 35 downgrades.
«[We have] noticed that examples of specific rating institutions' upgrades of issuer ratings are clearly above the industry average, and rating inflation and other potential risks exist,» NAFMII said.
In the last two months, China has been undergoing credit pressures with a string of defaults across various sectors including property, energy, automobiles, chip manufacturing and more.
