EBA欧洲银行-28Mapping-Report-ICAP29_16页_434kb

Summary of ICAP Group S.A.'s Credit Assessments Mapping under the Standardised Approach

Core Content

This report outlines the mapping of ICAP Group S.A.'s (ICAP) credit assessments under the Standardised Approach (SA) for credit risk purposes. The mapping was conducted by the Joint Committee (JC) in accordance with the Commission's Implementing Regulation (EU) 2016/1799, which defines the Implementing Technical Standards (ITS) for mapping ECAIs' credit assessments.

The mapping is not intended to be a direct comparison of rating methodologies or a report as required by the Credit Rating Agencies Regulation (CRA), but rather a correspondence of ICAP's rating categories to a regulatory credit quality scale (CQS) for prudential purposes. It implies that a degree of prudence may be applied where there is insufficient evidence regarding the underlying risk.

Main Rating Scale and Categories

ICAP provides a Global long-term rating scale which includes the following credit assessment categories:

• AA: Lowest credit risk; companies can honour obligations even under severe distressed conditions.
• A: Very low credit risk; companies can honour obligations even under severe distressed conditions.
• BB: Very low credit risk; companies are likely to be affected marginally by severe distressed conditions.
• B: Low credit risk; companies are likely to be affected slightly by severe distressed conditions.
• C: Moderate credit risk; companies are sensitive to market and economic conditions.
• D: Relatively increased credit risk; companies are rather sensitive to market and economic conditions.
• E: Increased credit risk; companies are very sensitive to market and economic conditions.
• F: Significantly increased credit risk; companies have or are likely to have problems in honouring obligations.
• G: Very high credit risk; companies have significant problems in honouring obligations.
• H: Highest credit risk; companies have very significant problems in honouring obligations.
• N.R.: Not Rated; includes companies that cannot be rated.
• N.T.: Not Trading; includes companies that have ceased to operate.
• N.C.: Not Calculated; includes companies that cannot be calculated.

Key Methodology and Findings

The mapping process involved two stages:

1. Initial Mapping based on Quantitative Factors:

   • The long-run default rates were calculated using bankruptcy information provided by ICAP.
   • For rating categories AA to BB, the number of rated items was below the required minimum, so the mapping was based on the long run default rate benchmark from the international rating scale.
   • For B, the number of rated items was sufficient to use the bankruptcy rate for mapping.
   • For C to F, empirical bankruptcy rates were calculated, and these were used as proxies for long-run default rates.
   • For G and H, the meaning and relative position of the rating categories were used for mapping, as empirical data was insufficient.

2. Final Mapping after Qualitative Review:

   • The qualitative factors from Article 7 of the ITS were applied to refine the initial mapping.
   • The default rates were increased by 100% to ensure a more conservative approach, especially for categories with default rates close to the upper bound of the assigned CQS.
   • For AA, A, BB, the quantitative factors were representative of the final CQS.
   • For B, the quantitative factors suggested CQS3, but after the qualitative review, it was mapped to CQS4.
   • For C, D, E, F, the adjusted bankruptcy rates suggested CQS4, CQS4, CQS5, and CQS5 respectively.
   • For G and H, the meaning and relative position of the rating categories were used to map them to CQS6.

Mapping Table

Key Information

• ICAP is a registered ECAI under the CRA, meeting the eligibility criteria for credit assessment institutions.
• The mapping is based on the Standardised Approach (SA) and aligns ICAP's credit assessments with a regulatory credit quality scale (CQS) for prudential purposes.
• The methodology involved the use of quantitative factors (bankruptcy rates) and qualitative factors (meaning and relative position of ratings) as outlined in the ITS.
• Default definition has evolved over time, with ICAP adopting a new definition in 2012 that includes 90 days of delayed payments, which affected the calculation of default rates.
• The mapping process was conducted using data from the ESMA Central Repository (CEREP) and directly from ICAP, with adjustments made to ensure prudence and alignment with the regulatory framework.
• The final mapping reflects a combination of quantitative and qualitative considerations, with adjustments made to ensure consistency with the international rating scale and regulatory requirements.