New Hong Kong-based credit rating agency opens for business

Its mission is to displace the "Big Three".

Universal Credit Rating Group (UCRG) said it intends to reform the current international credit rating regime to create the initial framework for a new system by 2020 with the ability to provide credit risk information on all the world's economies by 2025.

The new ratings agency is a joint venture among Chinese, Russian and American firms: Beijing-based Dagong Global Credit Rating; Russia's RusRating and U.S.-based agency Egan-Jones Ratings.

The partners consider UCRG part of a necessary overhaul of a system whose failings contributed to the 2008 global financial crisis.

The Big Three consists of Standard & Poor's, Moody's and Fitch Ratings. Their ratings play a central role in determining how investors allocate billions of dollars, and indicate to buyers of debt how likely they are to be paid back.

During the Great Recession of 2008, the Big Three were criticized for giving top ratings to mortgage-backed securities that eventually failed, igniting a punishing global recession.

Guan Jianzhong, Chairman and President of Dagong Global Credit Rating and Chairman of the UCRG, said ratings reform was essential to the recovery of the world economy.

"Credit ratings are indispensible in global economic operation, and it is obvious that the current rating system needs reforming and introducing new thinking," he said.

UCRG believes there's been inadequate reform of the international credit ratings system since the crisis. That is really the impetus for seeking some alternatives for global institutional investors.

UCRG intends to bring a more international perspective to ratings and provide greater accountability. Its ratings are not going to represent the “parochial interests of New York-based firms.” A self-policing mechanism will see contributors' ratings assessed over time.

“There's going to be a variety of perspectives included as a result of a variety of ratings firms being part of it," said Sean Egan, President of Egan-Jones Ratings and Director of the UCRG.