Core Viewpoint - Establishing a globally comparable RMB rating system with Chinese characteristics is crucial for overcoming the current bottlenecks in China's rating industry [1] Group 1: Regulatory Actions - On September 30, S&P's wholly-owned subsidiary in China, S&P Global Ratings (China) Co., Ltd., received a warning letter from the Beijing Securities Regulatory Bureau for failing to adhere to consistency principles and proper information disclosure during its securities rating business [1] - Other rating agencies, such as Dongfang Jincheng International Credit Rating Co., Ltd. and United Ratings Co., Ltd., have also faced penalties for similar violations since August [1][2] - The penalties highlight a trend where rating agencies struggle with maintaining independence and credibility due to a predominant issuer-paid model, leading to inflated ratings [3] Group 2: Consistency Principle - The consistency principle requires that ratings for the same type of objects or the same rated entity should use consistent standards and procedures, ensuring a true, objective, and fair representation of credit quality [3] - There are three dimensions to the consistency principle: vertical stability over time, horizontal comparability across entities, and transparency and repeatability of the rating process [3] - The current issuer-paid model in China has led to a lack of differentiation in ratings, with over 90% of bonds rated AA or above, contrasting sharply with the normal distribution seen in mature markets [3] Group 3: Industry Evolution - In August 2021, the People's Bank of China and other departments issued a notice encouraging credit rating agencies to explore investor-paid ratings and disclose results, aiming to improve the industry's health [4] - Since 2020, leading rating agencies have been piloting innovative rating systems to enhance industry development and align with international standards [4] - In March 2023, United Ratings launched a high-differentiation "3C rating system" for investors, while China Chengxin Credit Rating Group introduced a "QE rating system" based on default probability measurement in May 2024 [4] Group 4: Responses to Penalties - S&P Global Ratings has received two regulatory penalties since entering the Chinese market in 2018, both related to consistency principle violations, with ratings often exceeding market averages [6] - United Ratings faced penalties for using different rating standards for the same entity under its 3C rating and issuer-commissioned ratings, violating the consistency principle [6] - A representative from United Ratings clarified that the inconsistency arose from internal conflicts between new and existing business lines, rather than intentional dual standards [7] Group 5: Future Directions - The Chinese rating industry aims to establish a self-developed, market-tested, high-differentiation global RMB rating system, moving away from reliance on international methodologies [8] - The initial concept of a new rating system was to maintain a low central rating to avoid market shocks, leading to a gradual dual-track approach [8] - The development of new rating systems targeting investors is a common trend among rating agencies, indicating that the industry is in an exploratory phase regarding direction, pathways, and regulatory boundaries [8]

Group 1 - The announcement from the China Interbank Market Dealers Association indicates that United Ratings Co., Ltd. violated the principle of rating consistency by using two different rating standards for the same entity [1] - As a result of this violation, United Ratings has been given a serious warning and is required to conduct a comprehensive and in-depth rectification regarding the issues exposed by the rating consistency problem [1]

Core Viewpoint - The China Interbank Market Dealers Association issued a warning to United Ratings Co., Ltd. for violating the principle of rating consistency by using two different rating standards for the same entity in the interbank bond market [1] Group 1 - United Ratings was found to operate both 3C ratings and issuer-entrusted ratings for the same subject, which led to a breach of the rating consistency principle [1] - The association conducted a self-discipline meeting and decided to impose a severe warning on United Ratings [1] - United Ratings is required to undertake comprehensive and in-depth rectification regarding the rating consistency issues exposed by this incident [1]