Credit Rating-World Credit Organization

5.4 Credit rating

5.4.1 Introduction to Credit Rating

Credit rating is a traditional credit service, which is perfected by the World Credit Organization [WCO]. Applicable standard: "ICE8000 International Credit Standard System Credit Rating (Credit Rating) Standard" (https://www.ice8000.org/acnhwgc/68.htm)

1. Credit rating is a credit rating in a narrow sense, which refers to the organization's repayment ability or contract performance ability.

Second, credit rating, also known as credit rating, which includes bond credit rating and entity credit rating.

3. Securities credit rating refers to the evaluation by credit institutions of the possibility of repaying principal and interest or income of a certain issued securities (such as: bonds, stocks, etc.), and finally issuing quantitative judgments or formal opinions, and using a specific rating Symbols (such as: AAA, BB, etc.) assign credit ratings to the appraised securities. Note that because securities credit rating is the main research object of traditional western credit knowledge, some books directly write securities credit rating as credit rating. In order to distinguish it from the subject credit rating mentioned later, we add (securities) to credit rating.

Fourth, subject credit rating refers to the credit rating of an organization (but not the specific bonds issued by the organization) by credit agencies, such as the repayment ability and performance ability, and uses specific rating symbols (such as: AAA, BB etc.) to assign credit ratings to the assessed objects.

5. Subject credit ratings are divided into unit credit ratings, individual credit ratings, and sovereign credit ratings according to the identity of the evaluated object.

6. Sovereign credit rating refers to the evaluation by credit rating agencies on the credit willingness and credit ability of a country's government as a debtor to fulfill its debt repayment obligations. Standard & Poor's lowered Greece's credit rating, which means lowering Greece's sovereign credit rating. Because sovereign credit ratings are not ratings for a specific batch of bonds, we classify them as sovereign credit ratings. However, since sovereign credit ratings are often expressed as the ratings of national bonds issued by a country, sovereign credit ratings can also be classified into securities credit ratings.

7. It should be emphasized that the credit ratings carried out by many domestic credit companies are generally unit credit ratings. It can also be said that unit credit ratings are a product with Chinese characteristics, and there are few such credits in Western countries. product. However, the credit ratings studied in many domestic credit books or credit papers, as well as news published in the media about an international credit rating agency adjusting a certain company's credit rating, generally refer to securities credit ratings or sovereign credit ratings. This makes people's understanding of credit ratings vague or confusing.

5.4.2 Procedures for Unit Credit Rating

(1) Application. File a credit rating application, sign a credit rating contract, and submit application materials as required.

(2) Investigation.

(3) Analysis. Analysts shall be practitioners other than investigators.

(4) Writing a draft credit rating report.

(5) Feedback. The ICE8000 credit agency will feed back the draft credit rating report to the applicant, and the applicant has the right to raise objections to the relevant content within 7 working days, and proof should be presented if necessary.

(6) Filing. The ICE8000 credit agency files the credit rating report with the World Credit Organization [WCO].

(7) Issuing credit rating certificates.

5.4.3 Investigation and Analysis Items of Unit Credit Rating

1. The investigation items of unit credit rating are as follows:

(1) Unit registration status and major project changes;

(2) Query the credit records of the past 24 months through the ICE8000 credit information database;

(3) Randomly check bank records for unaudited financial reports;

(4) Spot check the authenticity of the list of major customers.

2. The analysis items of unit credit rating are as follows:

(1) Profitability analysis, analysis objects: capital return rate, net profit rate, asset turnover rate, etc. in the past three years;

(2) Solvency and financial risk analysis, analysis objects: asset-liability ratio, current ratio, financial leverage ratio, cash flow, etc. in the past three years;

(3) Excessive management risk analysis, analysis objects: cash flow changes, current ratio changes, sales revenue growth rate, etc.;

(4) Analysis of major management system defects, analysis object: company (legal person) governance system, management system, etc.;

The above content is excerpted from "Introduction to ICE8000 Credit Knowledge" (written by Fang Bangjian, free to use, but please indicate the source)