Amid the EU’s ongoing sovereign debt crisis, the current international credit rating system has been accused of aggravating the world’s economic woes. Recently, Guan Jianzhong, Chairman of the Board and President of the Beijing-based Dagong Global Credit Rating Co. Ltd., spoke to Beijing Review reporter Yu Yan about reforms in the current international credit rating system and Dagong’s role. Dagong is the first non-Western rating agency to assess the world’s sovereign credit and risks.
Beijing Review: What’s your take on the current international credit rating system?
Guan Jianzhong: The current international credit rating system is monopolized by three U.S.-based agencies: Moody’s, Standard & Poor’s and Fitch. The whole global financial market is using the credit rating information they provide. However, the disadvantages of this system have been exposed since the outbreak of the global financial crisis in 2008.
The biggest problem with the current system is that the global credit rating responsibilities are taken by agencies from one single country. There’s no effective supervision from the international community.
Moreover, the existing competition mechanism causes credit rating agencies to abandon their principles and give false credit ratings. These agencies depend on providing ratings for their survival, while debt issuers tend to hire the agency that can give them the highest rating. The rating therefore may not be able to show risks accurately.......