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China-based ratings firm to target Fitch, S&P, Moody's

BEIJING -- The groups behind a new China-based ratings firm said Wednesday they planned to break dominance of the big three U.S. agencies in assessing state and company debt, a much-criticized part of the financial system.

China's Dagong, Egan-Jones Ratings (EJR) of the United States and RusRating in Russia are to set up a joint venture within six months to be headquartered in Hong Kong, the companies said at a news conference unveiling the partnership.

The three partners are inviting "organizations from every country" to join Universal Credit Rating Group, and Dagong chairman Guan Jianzhong said dozens of companies from more than 20 countries have expressed an interest.

The new group aims to break the stranglehold of the big three agencies — U.S.-based Fitch, Standard & Poor's and Moody's — in the next five years.

"I believe we can do this. Our goal is to form a new system with the synergy of everybody that will balance the existing system," Guan said.

The global financial crisis proved that the current international ratings system has flaws that "jeopardize human prosperity and development" and needs to be reformed, the firms said in a document they dubbed the "Beijing Declaration."

Fitch, S&P and Moody's — long-established agencies that provide risk assessments to investors — were widely criticized for having given their highest ratings to the housing debt instruments whose failure sparked the global financial crisis.

Universal Credit Rating Group will be "independent" and composed of private firms "whose responsibilities do not conflict with credit rating, and which do not represent the interest of any particular country or group," the companies said.

The big three U.S. agencies will not be considered for membership "because there is big divergence between the principles and positions we respectively follow," said Guan.

1 Comment
October 26, 2012    freeman70@
It is about time we had a more balanced approach to ratings. However, it remains to be seen whether or not this new agency will degenerate into propaganda machine for the financial products the founding members want to push on unsuspecting investors. Remember that the only one who really cares about losing your money is you. It is easy for financial consultants to play around with other people's money. They are never really held accountable for losses. That's how the current financial mess got started. That's how your pension fund went bankrupt over night. There will be no improvement until certain banks, financiers, and businesses are forced to take responsibility and pay for it. There will be no progress unless we restrict the ability of financiers to flood the market with dubious financial instruments.
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