November Bond Mayhem Claims Another Scalp as Ratings Firm Slapped With Ban
What’s new: China Chengxin International Credit Rating Co. Ltd. has been banned from rating new interbank bonds for three months due to its misconduct in credit ratings, the interbank bond market’s self-regulatory body said Tuesday in a statement (link in Chinese) after a one-month probe.
The credit ratings firm had found issues with the finances of Yongcheng Coal and Electricity Holding Group Co. Ltd., a state-owned coal miner who defaulted on a bond last month, and its parent company, including salary arrears and loans with a potential of default, but had failed to investigate or disclose related credit risks, according to the National Association of Financial Market Institutional Investors.
What’s the background: A string of bond defaults by high-rated state-owned enterprises (SOEs) that sent shockwaves through the market brought failings in the credit ratings industry into stark relief.
Yongcheng’s default came as a surprise as the SOE received the highest possible rating from China Chengxin International just a month before the default.
With problems including inflated credit ratings continuing to curtail the development of the country’s bond market, China’s financial authorities have pledged to tighten supervision of the credit ratings industry.
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