The People's Bank of China (PBC), the National Development and Reform Commission, the Ministry of Finance, the China Banking and Insurance Regulatory Commission (CBIRC), and the China Securities Regulatory Commission jointly released a notice on promoting the sound development of the credit rating business in the bond market. The notice sets out requirements for credit rating agencies regarding improving the rating method system, as well as corporate governance and internal control mechanism, and enhancing information disclosure. It also emphasizes on improving the credit rating ecosystem and requires strong oversight of rating agencies.
The notice on credit ratings in the bond market is market-oriented and driven by rule of law and the reform initiative to align with international practice. The notice promotes better rating quality and rating differential classification, so that credit ratings can play a better role in risk disclosure and pricing. It helps maintain a fair and equitable market, and drives the credit rating business to better support the sound overall development of the bond market. Going forward, PBC will continue to work with other departments to strengthen the oversight of the credit rating business. It will ensure that rating agencies fully play their role as “gatekeeper” to support the continuous sound development of the bond market.
In addition to this, PBC, in its Monetary Policy Implementation Report for the second quarter of 2021, committed to promoting the design of carbon emission reduction policy support tools. PBC has established carbon emission reduction support tools to provide low-cost funds to support financial institutions to provide preferential interest rates for key projects with significant carbon emission reduction effects. The report noted that the design of the new instruments would be in accordance with the “principles of marketization, the rule of law, and internationalization” and it will “embody openness and transparency.” The financial institution can calculate the carbon emission reduction driven by the loan and disclose the carbon emission reduction information to the public. From the perspective of social supervision, the information disclosed by financial institutions is to be verified by a third-party professional institution.
Keywords: Asia Pacific, China, Banking, Insurance, Securities, Credit Ratings, Bond Market, Credit Rating Agency, Credit Risk, ESG, Carbon Pricing, Low-Carbon Economy, Climate Change Risk, CBIRC, PBC
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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