China warns banks not to rely on rating agencies

BEIJING Feb 17 (Reuters) - Chinese banks should make lending and investment decisions based on their own judgment rather than rely on ratings provided by other agencies, the country's banking regulator said in guidelines published on Thursday.

Chinese officials have been consistently critical of international rating agencies, saying they helped provoke the global financial crisis by giving top ratings to complex structured securities, many of which turned out to be junk.

Under the new guidelines, banks must use their own ratings in deciding whether to extend credit for a client, the China Banking Regulatory Commission (www.cbrc.gov.cn) said in a statement on its website.

"The rules aim to prevent banks from facing systemic risks that could stem from possible adjustments in external ratings," the CBRC said.

It added that banks must rely on their own internally determined ratings as the barometer for making big investments, whether buying bonds or derivatives.

The CBRC did not specify what constituted a big investment, saying that banks must decide for themselves.

It added that banks could use external ratings for reference, but must draw on ratings from at least two agencies.

The statement said that foreign banks must also comply with the new guidelines for their China-based operations. (Reporting by Aileen Wang and Simon Rabinovitch; Editing by Alex Richardson)