Man in the middle
Former CEO of Universal Credit Rating Group offers an insider's look at what it was like working for China's pre-eminent global ratings agency
The big three ratings agencies have taken their licks. First came the governance scandals of the 2000s, when they failed to catch a massive accounting fraud by the likes of Enron and WorldCom. Then Fitch, Moody's and Standard & Poor's skated into 2007, happily rating thousands of structured debt instruments as triple A, only for the global financial crisis to reveal what they really were: highly complex and enormously risky.
Of course the ratings agencies are paid by the issuers, and that included the banks that were cranking out the structured debt that nearly toppled the global banking system in 2008-09.
One might think the time was ripe for an upstart ratings agency with none of the conflicts or failed methodology of the big three - which collectively do 95 per cent of global ratings work.
A ratings agency … that would generate cash was lower in priority
That was exactly the thinking of mainland-based Dagong when it launched Universal Credit Rating Group (UCRG) in June 2013 in partnership with Moscow-based RusRating and Egan-Jones of the United States.
Richard Hainsworth, who founded RusRating, enthusiastically backed Dagong's plan. He campaigned for the position of chief executive of UCRG and moved to Hong Kong in May 2013 to take up the role.
He lasted seven months. By the time Hainsworth left in December 2013, UCRG's office space had contracted by a third and there were just two full-time staff - a chief analyst and chief operating officer - and no clients.
A big part of the problem lay in the fact that Dagong backed the firm financially. For various complicated reasons, RusRating and Egan-Jones only contributed token sums to UCRG at start-up, leaving Dagong as its sole backer.
Hainsworth quickly realised he was the chief executive without control of the firm's budget - money decisions ultimately lay with Dagong chairman Guan Jianzhong.