1. Inhalt
  2. Navigation
  3. Weitere Inhalte
  4. Metanavigation
  5. Suche
  6. Choose from 30 Languages

Capital markets

US ratings agencies face Chinese challenge

Agencies Standard & Poors, Moody's and Fitch have dominated the global market for credit ratings. But their dubious role in the 2008 financial crisis has highlighted the need for more impartial alternatives.

In early 2008, the big three US ratings agencies. Standard & Poors, Moody's and Fitch, were till issuing first-rate credit ratings for banks and financial products which only months later collapsed in the financial crisis.

Some analysts have criticized the agencies' near-monopoly positions, arguing their inaccurate assessments helped inflate the subprime mortgage bubble in the United States that caused the crisis

Since 2008, nothing much has changed as the "big three" agencies still dominate 95 percent of the global ratings market, passing crucial verdicts without which the world's finance markets wouldn't work.

However, China's independent ratings agency Dagong Global Credit is preparing a challenge which could challenge the US agencies. In October, it announced plans to form a joint venture with Russian agency RusRating and Egan-Jones Rating, the fourth largest US ratings group.

The three companies said in a statement that Universal Credit Rating Group, as the new agency will be called, intended to issue "impartial ratings" in an attempt to "speed up reform of the global credit rating system."

Dagong Chief Executive Guan Jianzhong said the group planned to be fully operational within the next six months, and that that "dozens" of smaller ratings businesses from more than 20 countries were interested in joining the group, which would be based in Hong Kong.

Doubts about independence

In an attempt to dispel concerns about state interference in the new group, Guan Jianzhong pointed out that his company was a private venture in which Chinese state and party officials had no political influence.

In addition, the three founders stated in their statement that the new agency wouldn't represent the interests of any country or group.

In this Monday Jan. 16, 2012 photo, employees of Dagong Global Credit Rating Co. work at the company's office in Beijing, China. Guan Jianzhong , chairman of Dagong Global Credit Rating Co. is waging a one-man crusade to change the credit rating industry, arguing that China and other cash-rich developing nations shouldn't have to rely on ratings agencies in the deeply indebted United States, especially after they helped fuel the global crisis that plunged the U.S. and then Europe into economic turmoil. (Foto:Andy Wong/AP/dapd)

There are doubts as to how independent Dagong can be

However, doubts remain about the agency's independence as CEO Guan is a Communist Party member with close ties to the Chinese leadership. Before he founded his private firm, he had worked for the government, which still employs him as an advisor.

Such ties are crucial for doing business in China, market analyst Oliver Everling told DW. "It's impossible to set up a ratings agency in China that is fully independent of the state and could act against state policy," he said. Close ties to politics and business were essential for any agency, Everling added.

Business model makes the difference

The new agency arrives amid mounting criticism of the ratings decisions taken by the US agencies and the business model they pursue.

"There is serious evidence that in the past decade a number of European countries were given worse credit ratings than would have been justified in respect to their finances and the general state of their economies," Manfred Gärtner of the University of St. Gallen told DW

He welcomed the foundation of an "alternative" to the United States agencies, arguing the seat of the agency was of minor importance.

Gärtner said the biggest problem with ratings agencies was their complex network of inter-dependence with the finance industry as a result of joint ownership structures and shared profit interests, which were fostered by close private ties and business locations.

China's Universal Credit Rating Group, Gärtner added, could avoid the typical clash of interest by adopting the business model of its partner Egan-Jones rather than that of rivals Moody's, Standard & Poors and Fitch.

Egan-Jones Ratings charges the investors who buy their ratings reports, while the Big Three are paid by the company or bank which issues a financial product or seeks a rating.

As well as China, Europe, too is making efforts to launch its own ratings group next year - a project which is spearheaded by Roland Berger consultancy firm.

In addition, the influential Bertelsmann Foundation of Germany presented a proposal in spring 2012, suggesting an international not-for-profit agency.

DW.DE

Audios and videos on the topic