EBA欧洲银行-28Mapping-Report-Dagong29_22页_503kb

Summary of Dagong Europe Credit Rating's Credit Assessment Mapping under the Standardised Approach

Core Content

This document outlines the mapping of Dagong Europe Credit Rating's (Dagong) credit assessments under the Standardised Approach (SA) as per the European Union's Capital Requirements Regulation (CRR). The mapping is conducted by the Joint Committee (JC) in accordance with the Commission's Implementing Regulation (EU) 2016/1799, which sets out the Implementing Technical Standards (ITS) for mapping ECAI credit assessments to a regulatory credit quality scale (CQS).

The mapping is intended to align Dagong's rating categories with the CQS used for prudential purposes, ensuring that financial institutions can apply appropriate risk weights based on these assessments. It is important to note that this mapping is not meant to be a direct comparison of rating methodologies between Dagong and other ECAIs, nor is it the same as the mapping that ESMA is required to report under the Credit Rating Agencies Regulation (CRA).

Main Ratings Scales and Categories

Dagong provides several credit ratings, including:

• Long-term credit rating scale: Includes AAA, AA, A, BBB, BB, B, CCC, CC, C, and D.
• Short-term credit rating scale: Includes A-1, A-2, A-3, B, C, and D.

Each rating category is mapped to a credit quality step (CQS) under the SA, which is used to determine risk weights for credit risk management purposes.

Key Mapping Results

The final mapping of Dagong's long-term credit rating scale is as follows:

The short-term credit rating scale is mapped based on an internal relationship between long-term and short-term ratings. The final mapping is:

• A-1: CQS 1
• A-2: CQS 3
• A-3: CQS 3
• B: CQS 4
• C: CQS 4
• D: CQS 4

Methodology and Rationale

The mapping process followed a two-stage approach:

1. Quantitative Stage: Default rates were calculated using the long run default rate benchmarks from the international rating scales. However, due to the limited data available for Dagong, these calculations were based on indicative ratings and benchmark data from three international ECAIs (S&P, Moody's, and Fitch). The implied default rates for each category were used to assign the initial CQS.

2. Qualitative Stage: The JC reviewed the qualitative aspects of each rating category to ensure that the mapping reflected an appropriate degree of prudential risk. Qualitative factors were especially important where quantitative evidence was insufficient.

The rationale for the mapping includes the need to balance prudential concerns with market dynamics, particularly for new ECAIs like Dagong. This allows for more competition and avoids undue disadvantage for institutions with limited quantitative data.

Additional Information

• Default Definition: Dagong uses a definition that includes failed or delayed payments, bankruptcy, legal receivership, and distressed debt exchanges.
• Benchmarking: The JC used data from benchmark ECAIs to compare and validate the mapping, especially for the long-term ratings.
• Risk Weights: CQS 4 to 6 are assigned the same risk weight of 150% under the CRR, which influences the final mapping decisions for some categories.

Conclusion

The mapping exercise ensures that Dagong's credit assessments can be integrated into the regulatory framework of the EU for prudential purposes. It reflects both quantitative and qualitative considerations, with a focus on maintaining consistency and fairness in the credit risk assessment process.