Quality of ratings highlighted by authorities

Regulators will further strengthen the quality of ratings after the authorities punished Beijing-based Dagong Global Credit Rating with a one-year suspension of its business, analysts said.

In the penalty announcement co-issued by the China Securities Regulatory Commission and the National Association for Financial Market Institutional Investors on Aug 17, Dagong was found to have misused the company's official seal, and charged high fees to issuers for consulting services. The latter is an implicit form of guarantee for issuers to get high ratings.

So far the regulator is yet to impose an immediate ban on all credit rating services of the company, only requiring that regulators will not receive documents from issuers that failed to sign contracts with Dagong by Aug 17, the date of the issuing of the penalty, according to two people with knowledge of the matter.