American Rating Firms Will Have Competition
A Summit Forum on the Construction of an Asian Credit System was held in Beijing on June 23 2014. To push forward reform of the international credit rating system, an advisory council of Universal Credit Rating Group, or UCRG, was established during the Summit Forum. On September 15 2008, Lehman Brothers, an investment bank with a history dating back 158 years, suddenly went bankrupt. Just before the incident, American rating agencies had given an A-rating to Lehman Brothers. Why did the world rely on such unreliable ratings? Because Moody, Standard & Poor's and Fitch - the three biggest rating firms that take 96 percent of the total market share - are all American companies. Due to this anomaly, other countries plan to set up an international rating agency constituted by agencies of multiple countries which does not represent the interests of any single country or narrow group.
The current system has become a tool of political leverage Dominique de Villepin, former Prime Minister of France, has been elected Chairman of the advisory council. He takes the view that the construction of a new international rating order and reform of the current rating system is important for the following reasons: firstly, the ratings given by the Big Three are incorrect, secondly, the current credit rating agencies are inefficient, and thirdly, the credit ratings are often used as political tools. In the Ukraine crisis, Standard & Poor's downgraded the outlook of Russia to "negative", which, in Mr. Dominique de Villepin's opinion, suggested that the current system is politically unreliable.
An Asian credit system with "two eyes"
Chinese Prime Minister Li Keqiang called for an Asian credit system at the 16th China-ASEAN (10+1) Leaders' Summit. In the face of the flawed world credit rating system and the U.S. monopoly, we have to build up a credit rating system for Asia. Mr. Dominique de Villepin has proposed a "double rating": one is the rating based on the local environment and specific circumstances; and another is the rating provided to cross-border investors, applying the global standard. "Compared with one eye, two eyes can always see clearer," he said.
Guan Jianzhong, chairman of UCRG and Dagong Global Credit Rating, said: "To establish a credit rating system for Asia, we have to achieve the transnational sharing of rating information."
Song Guangchao, Secretary-General of the Credit Committee of China Information Industry Association, told the media that the establishment of a special institution dedicated to the purpose the Asian Credit Rating System Research Center - would soon be approved by the Chinese government.