EBA欧洲银行-28Mapping-Report-JCRA29_29页_767kb

Summary of the Mapping of JCRA Credit Assessments under the Standardised Approach

Core Content

This document outlines the mapping of Japan Credit Rating Agency Ltd (JCRA) credit assessments under the Standardised Approach (SA) as required by the European Union's Capital Requirements Regulation (CRR). The mapping was conducted by the Joint Committee (JC) using the methodology specified in the Commission's Implementing Regulation (EU) 2016/1799, which sets out the Implementing Technical Standards (ITS) for mapping ECAIs' credit assessments.

The mapping is intended to align JCRA's rating categories with a regulatory credit quality step (CQS) scale for prudential purposes, not for comparing methodologies or ratings across institutions. The process involves both quantitative and qualitative assessments, with the latter playing a more significant role where data is insufficient.

Main Ratings Scales and Mapping

1. Long-term Issuer Ratings Scale

• Mapping Process: The mapping was derived in two stages: initial based on quantitative factors (long and short-run default rates) and then reviewed using qualitative factors.
• Quantitative Factors:
  • Default rates were calculated for rating categories based on data from CEREP (1 January 2001 to 1 July 2010).
  • For AAA, AA, A, BB, and CCC-C, the number of ratings was insufficient, so the mapping was based on the equivalent international rating category.
  • For BBB, the calculated default rates were compared with the long-run benchmark intervals.
  • For B, the analysis was inconclusive due to varying results across time periods, leading to a review using qualitative factors.
• Qualitative Factors:
  • The default definition used by JCRA was consistent with the benchmark definition in the ITS.
  • The meaning and relative position of rating categories were considered, reinforcing the mapping based on long-term stability and risk.
• Final Mapping:
  • AAA, AA: CQS 1
  • A: CQS 2
  • BBB: CQS 3
  • BB: CQS 4
  • B: CQS 5 (after qualitative review)
  • CCC, CC, C, LD, D: CQS 6

2. Short-term Issuer Ratings Scale

• Mapping Methodology: Since default data for short-term ratings is not comparable to the 3-year benchmark, the mapping was derived based on the internal relationship between JCRA's long-term and short-term ratings scales.
• Mapping Criteria:
  • The most frequent CQS assigned to the related long-term rating categories was used.
  • In case of a tie, the most conservative CQS was selected.
  • The risk weights for CQS 4 to 6 are all 150% under Article 131 of the CRR.
• Final Mapping:
  • J-1+: CQS 1
  • J-1: CQS 2
  • J-2: CQS 3
  • J-3: CQS 4
  • NJ: CQS 4
  • LD, D: CQS 6

3. Long-term Issue Ratings Scale

• Mapping: This scale is considered comparable to the Long-term Issuer Ratings Scale.
• Mapping Basis: The meaning and relative position of the rating categories were used in conjunction with the mapping of the corresponding Long-term Issuer Ratings Scale.
• Mapping Table:
  • AAA, AA, A, BBB, BB, B, CCC, CC, C, D: Mapped to CQS 1 to 6, based on the Long-term Issuer Ratings Scale.

4. Short-term Issue Ratings Scale

• Mapping: This scale is considered comparable to the Short-term Issuer Ratings Scale.
• Mapping Basis: The meaning and relative position of the rating categories were used in conjunction with the mapping of the corresponding Short-term Issuer Ratings Scale.
• Mapping Table:
  • J-1, J-1+, J-2, J-3, NJ, LD, D: Mapped to CQS 1 to 6, based on the Short-term Issuer Ratings Scale.

Key Information

• Purpose: The mapping is intended to ensure consistency and comparability of JCRA's credit assessments with the regulatory CQS scale for prudential risk assessment.
• Methodology:
  • Quantitative analysis of default rates using historical data.
  • Qualitative review of default definitions and rating meanings when quantitative data is insufficient.
• Regulatory Framework:
  • Based on the CRR (Article 136(1) and (3)) and the ITS under Implementing Regulation (EU) 2016/1799.
  • The mapping aligns JCRA's rating categories with the CQS scale used by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA).
• Special Considerations:
  • For B rating category, the mapping was not conclusive based on default rates and required qualitative adjustment.
  • LD and D ratings are mapped to CQS 6 due to their high default risk.
  • The risk weights for CQS 4 to 6 are equal (150%), so the most conservative mapping was chosen when there was ambiguity.

Conclusion

The mapping exercise ensures that JCRA's credit assessments are aligned with the regulatory framework for prudential purposes. It reflects a balance between quantitative default rate analysis and qualitative interpretation, particularly for less data-rich rating categories. The final mappings for JCRA's credit ratings are provided in the annexes and are consistent with the CQS scale used in the EU's Standardised Approach.