"A Study of Western Credit Rating Ideas", the first of its kind, was published on Thursday by Dagong Global Credit Rating Group, an emerging international credit rating agency.
"Practices have proven the errors in the Western credit rating ideas and the global credit crisis has presented solid evidence," Guan Jianzhong, Chairman of Dagong said at a press conference.
Guan said, 2008 witnessed the century-long Western rating ideas being dragged down from the altar, and a systemic and scientific study can help people get a clear picture of the ideology underlying the methodologies of incumbent credit rating agencies when they observe the credit-based world, and discover the underlying reason behind the credit crunch.
The study looks into 104 available rating methodologies for 70 sectors, and 1,266 rating indicators and rating opinions released by Moody's, S&P and Fitch from 2004 to 2014. It has laid open the Western credit rating ideas including institutional factors, economic factors, financial factors, probability of default, country ceilings, credit rating determination and credit rating verification among others.
Guan believes Western credit rating ideas fail to indicate the essence of rating, i.e. revealing debtors' repayment risks by analyzing the quantitative relationships between repayment sources and debt burden, which makes flawed Western rating ideas lose their value in rating practice.
Talking about the logic and ability to objectively indicate credit risks, Guan said western credit rating ideas take default rate calculation as a rating method and use probability of default as a decisive factor in credit rating determination, which cannot present the rules governing credit risk formation and thus have lost its function of credit risk early-warning.
Guan held that western credit rating ideas are highly ideologicalized, through incorporating sovereign credit ratings into country ceilings and ranking sovereign credit ratings on the basis of Western political and economic concepts.
An offprint of "A Study of Western Credit Rating Ideas" published by People's Daily Publishing House was released at the press conference.
Experts held this research has filled the gap in studies of Western credit rating philosophies. In today's world when the global credit crisis is still being felt, reflections on credit rating systems and reforms can be seen throughout the world. Dagong's research results achieved in fulfilling this historical mission show what Western credit rating concepts are all about, making remarkable contribution to the efforts to fend off another global credit crunch.
It is believed that this study is another critical strike to the Western rating hegemony after "The Guiding Principles of Credit Rating" released by Dagong. As the old ideologies are eradicated and the new ones are established in the study, the Western rating philosophies that have misled the world over a century would be discarded step by step, according to experts.
