(Yicai Global) Dec. 15 -- China’s securities regulator has told a domestic credit agency to suspend its ratings business temporarily after concerns were stoked by recent bond defaults at high-rated companies.

Golden Credit Rating International was ordered to pause the business for a three-month rectification, the Beijing branch of the China Securities Regulatory Commission announced yesterday. It is the second agency to suffer the penalty after Dagong Global Credit Rating received a one-year freeze in August 2018.

The recent spate of bond defaults at high-rated companies, including miner Yongcheng Coal and Electricity Holding Group and chipmaker Tsinghua Unigroup, has raised questions about the ratings sector, pointing directly to the problems of inflated scores and weak early-warning mechanisms in the trade.

Golden Credit’s information system was insufficient to support the internal control and compliance management requirements to ply the rating business, according to the statement posted yesterday on the website of the CSRC’s Beijing branch.

Some project rating models had a deficient basis for upward adjustment of qualitative indicators and important factors affecting the solvency of subjects rated were not analyzed as necessary and rating models that were not up to snuff were used for data analysis, the CSRC said.

Two executives of Golden Credit, which was set up in 2005, were investigated last year for accepting bribes. They helped several companies with their credit ratings and introduced debt issuance business for several securities firms, taking bribes in an unknown amount.

Editor: Ben Armour