CBRC tells banks to be wary of rating agencies
February 28, 2011 Category Finance, Weekly
The China Banking Regulatory Commission (CBRC) has ordered lenders to reduce their reliance on external rating firms and to build up their internal risk capabilities. The external rating results shouldn’t be relied on in the banks’ decision whether or not to approve loans, it said. External rating agencies may only be used as references, not as a benchmarks. Banks are required to refer to at least two external rating firms when they want to introduce a major investment product if the bank has no internal risk rating system. Banks must quote the lower rating which indicates higher default possibilities. Banks must use their own rating system in making a major investment, the CBRC said. They also have to evaluate the rating firms they turn to every two years to make sure that such firms are independent and capable.
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