Original title: Sword refers to false high ratings and insufficient discrimination
Our reporter Du Yumeng
In order to further enhance the autonomy of market entities in using external ratings and promote the market-oriented reform of the credit rating industry, the central bank has introduced substantive measures. On August 11, the Central Bank announced that it decided to pilot the cancellation of credit rating requirements for non-financial corporate debt financing instruments (hereinafter referred to as “debt financing instruments”).
“In recent years, although my country’s credit rating industry has achieved rapid development, there are also problems of’emphasizing market share and under-rating quality’ such as falsely high ratings and insufficient differentiation. As a result, the risk warning and investment pricing functions of credit ratings have not been obtained. Effectively play.” CITIC Securities’ chief IFCC analyst clearly told the “Securities Daily” reporter that in some recent defaults, some companies still have high ratings before defaulting. This will continue to be criticized for the falsely high credit rating. On the cusp of public opinion.
Although the quality of credit ratings plays a very important role in the healthy development of my country’s bond market, problems such as falsely high ratings, insufficient discrimination, and weak pre-warning functions in the rating industry have obviously restricted the growth of my country’s bond market to a certain extent. Quality development.
According to data provided by the Bank of China Research Institute, since 2021, the bond market financing function has been significantly enhanced. As of August 10, the bond market financing scale reached 36.2 trillion yuan during the year, an increase of 12.3% year-on-year. However, while the size of bonds continues to grow rapidly, incidents of default on credit bonds have occurred from time to time. In the first half of this year alone, a total of 109 credit bonds defaulted in the bond market, involving a bond balance of 116.8 billion yuan. Among them, there were many cases of “high-rated and high-default”.
In this context, on August 6, the “Notice on Promoting the Healthy Development of the Bond Market Credit Rating Industry” issued by the central bank and other five ministries specifically mentioned that it is necessary to reduce regulatory requirements for external ratings and adjust regulatory policies at the appropriate time. The level threshold for investable bonds with similar funds will weaken the dependence of bond pledge repo on external ratings, and return the dominant power of rating demand to the market.
According to Zhang Yijun, deputy general manager of the research and development department of Oriental Jincheng, reducing the reliance of supervision on external ratings and returning the dominant power of rating demand to the market is an important direction of the regulatory policy of the rating industry in recent years.
For example, in the first half of this year, the Interbank Market Dealers Association made adjustments to the rating mechanism of debt financing instruments. Specifically, at the end of January, the Association of Interbank Market Dealers issued a supplementary notice on matters related to the “Registration Document Form System for the Public Issuance of Non-financial Corporate Debt Financing Instruments (2020)”, stating that in the reporting process, companies are not required to provide debt financing instruments. Credit rating report and follow-up rating arrangement seat declaration material requirements. Subsequently, on March 26, it issued the “Notice Concerning the Implementation of Debt Financing Instruments to Cancel the Compulsory Rating Arrangements,” stating that the mandatory disclosure requirements for debt rating reports will be cancelled during the issuance process, and the disclosure requirements for corporate entities’ rating reports will be retained. However, if the order of repayment of the principal and interest of the debt issued by the company is inferior to that of general debt and ordinary bonds, which may cause the debt rating to be lower than the subject’s rating, the company still needs to disclose the debt rating report.
Obviously, the central bank announcement is also based on the confirmation and supplement of previous policies. From the perspective of market impact, whether it is the cancellation of ratings or the gradual removal of mandatory ratings, it may have a relative impact on the credit bond market in 2021 and beyond. In particular, in the future, newly issued bonds will face the risk of bond grades being tightened or unrated, while stock bonds also face the pressure of downgrading, and bond prices have downside risks.
As for the rating market and institutions, Zhang Yijun predicts that the next few years will be a period of reshaping the demand of the rating market, a period of transformation and reshuffle of rating agencies.
In his view, as the development of the rating industry gradually shifts from “regulation-driven” to “market-driven”, in the short term, rating agencies may be under pressure in terms of revenue and improvement of rating technology. However, with the implementation of relevant policies and the improvement of various supporting guidelines in the future, the survival and development of rating agencies will depend more on the recognition of investors, and will pay more attention to the “reputation mechanism”, which will help the industry to pay more attention to rating quality and products Services, to form healthy industry competition, to promote the continuous improvement of rating methods and models in the rating industry, to better utilize the risk disclosure and pricing functions, to meet the new demand for credit services in the capital market, and to promote the healthy development of the credit rating industry.
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