ONE of China’s biggest debt rating agencies has been punished by the securities regulator and a supervisory group under the central bank after the company violated regulations.

The China Securities Regulatory Commission (CSRC) said Friday it would ban Dagong Global Credit Rating Co., one of the country’s four big bond rating companies, from taking on new securities rating business for a year and forbade it from replacing senior management during that period.

That announcement came after the National Association of Financial Market Institutional Investors (NAFMII), an industry group under the central bank, said it would suspend Dagong’s business around debt-financing instruments for non-financial firms, also for one year.

Both the CSRC and NAFMII said that Dagong had provided consultation services to firms that it also issued credit ratings for.

The CSRC also criticized the company for poor internal management, unqualified management and assessment committee members, and missing modelling data.

The NAFMII said Dagong had provided false statements and information when the NAFMII was investigating Dagong’s business practices.

Dagong responded to the authorities’ latest moves by apologizing for its risk management problems and said it would rectify its operations, according to a statement on its website.

Dagong said it would seek to resolve issues facing China’s ratings agencies but did not specify what these issues were.

“We will seriously look into new situations and new problems faced by the industry to ensure our operations and work meet legal standards,” Dagong said.

Neither the CSRC nor the NAFMII said which companies seeking ratings were involved in the violations.

“Credit ratings agencies providing consulting services to companies seeking ratings seriously deviates from the principle of independence, and is prohibited by the relevant regulations of the interbank market,” the NAFMII said in the statement.

Dagong “violated industry norms, business rules and basic compliance requirements and caused serious adverse effects on the market,” it added.

A trader at an asset management firm in Shanghai said that he expected more action against local ratings agencies, with the CSRC vowing Friday to strengthen punishments for violations. (SD-Agencies)