Chinese rating agency Dagong accuses U.S. regulator of discrimination after registration bid denied

08:06, September 26, 2010      

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China's largest rating firm reaffirmed Saturday its bid for registration in the United States is justifiable and legal and said the U.S. regulator's rejection of its application is discriminatory.

The Securities and Exchange Commission (SEC) of the U.S. on Thursday declined the application by Dagong Global Credit Rating Co. Ltd. to become an officially recognized bond rater in the United States.

The SEC said it refused the registration because it could not ensure the Beijing-based company would comply with U.S. reporting rules.

"On the record before us, it appears that Dagong would not control what information would be produced to commission staff," SEC said. "We are unable to conclude that Dagong can comply with the record-keeping, production, and inspection requirements of the Exchange Act."

Dagong contended reporting rules are related to a nation's sovereignty, and should be coordinated between government regulators and not business entities.

Dagong also said reporting rules have never been used as a standard for the SEC to approve registration of rating agencies in the United States.

"It is a barrier specifically set for Dagong, which is obviously discriminatory against China and the Chinese rating agency. We are resolutely opposed that," Dagong said.

Dagong said its application is simply "market activity," that should not be involved in politics.

Rejection of the application runs counter to U.S. securities laws, it said, adding that it reserves the right to safeguard its interests through legal action.

As United States's largest foreign debtor and an owner of a significant amount of U.S. dollar-denominated assets, it is important a Chinese rating agency have a say in the rating of U.S. financial assets.

In a report released in July, Dagong gave emerging economies like Brazil and China higher credit ratings than the United States, the United Kingdom and Japan, based on their economic performance during the global financial crisis and debt levels.

Dagong's sovereign credit ratings were markedly different from those given by the three Western rating agencies - Moody's, Standard & Poors and Fitch.

Dagong said SEC's denial of its application indicates its intention to protect the monopolistic status of the three major rating agencies.

"We hope the SEC can comply with the agreements reached in the U.S.-China Strategic and Economic Dialogue and keep its rating market open to the rest of the world, based on internationally-recognized rules with transparency and equality," Dagong said.

Founded in 1994, privately-owned Dagong provides credit rating and risk analysis research for all bond issuers in China. It has more than 500 employees.

It also designs most domestic debt instruments and leads the Chinese credit rating market for corporate bonds and structured debt products.



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