Chinese Rating Company Dagong Looking to Hire, Expand in Europe

  • Chairman denies firm being investigated by European regulator
  • Dagong wants to increase `very small' market share, Guan says

China’s Dagong Global Credit Rating Co. is looking to hire in Europe as it expands operations and tries to increase market share, according to the firm’s chairman.

The assessor, one of China’s top three credit-rating companies, will move its European headquarters to Frankfurt from Milan very soon, and add staff to its office of fewer than 20 employees, Guan Jianzhong said in an interview on Monday. The subsidiary, which has been making losses since it set up operations in 2012, will promote the company’s methods and try to raise its "very small" slice of the market, Guan said.

He described as groundless a report that the firm’s European unit is being probed by the European Securities and Markets Authority, adding that he isn’t aware of any checks by regulators in the past 18 months. His comments came after Reuters reported last week that ESMA is investigating the subsidiary on concerns that it may not be “fully compliant with” local rules that prevent conflicts of interest. In an e-mailed statement on Monday, ESMA said that it doesn’t comment on supervised entities or on ongoing supervisory activities.

“Dagong has made significant investments in Europe and will continue to do so in the coming years," Guan said, without giving details. "We would like to promote our own credit-rating methodologies, which are superior to those adopted by our global competitors. This is a long march with high costs, so our market share won’t rise sharply soon. But without Dagong’s efforts, the world’s credit-rating market is hopeless."

Vocal Opponent

Guan has been a vocal opponent of methodologies adopted by the world’s biggest grading companies, including Standard & Poor’s and Moody’s Investors Service. He published a booklet in June, saying that foreign rating companies look at irrelevant factors to decide a bond’s risk and pay too much attention to historical default rates.

Dagong caused a flutter in 2013 when it cut the U.S.’ rating to A- from A after President Barack Obama signaled legislation raising the federal debt limit. That was below the rating of Botswana, which was graded A. Dagong lowered Japan’s local-currency sovereign ratings to A- from A on Dec. 17, and its foreign-currency grading to A from A+, each with a stable outlook.

— With assistance by Tian Chen

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