TCRI™_Taiwan Corporate Credit Risk Index

TCRI™ employs a semi-expert procedure, a quantitative model, and manual determination. The methodology is public, transparent, and with discriminatory power, which provides a reference for financial institutions in investment and lending.

Key Features

Basis and scope of the rating

• Uses public information as the basis; the information is public, complete, verifiable, and is not guided by companies.
• The scope of rating covers the majority of public companies, and the scope is much wider than any other domestic rating institution.

Key Benefits

Influence of TCRI™

• TCRI™ is the main index adopted by banks when making lending decisions and has over 90% share in the domestic banking market.
• An important basis for securities firms to make investments.
• Recognized as the most representative credit risk index by domestic academic and research institutions.

Key Advantages

The effectiveness of TCRI™ rating results is periodically validated.

• Warning Ability: the discriminatory power and default rate validate whether or not the rating system can effectively distinguish between companies with different credit risks.
• Stability: deviation of rating results are examined for mid-term and long-term lending and investment decisions.
• External benchmark: in addition to internal validation, the default rate is compared with external credit rating institutions.

TCRI™ Rating Method and Procedure

Rating method and procedure

The semi-expert model is mainly used based on a quantitative model and supported by manual determination. It is divided into three steps. 

TCRI™ Rating

The rating is divided into 1-9 levels, and Default.

Quantitative Model

Manual Determination

Manual determination mainly includes the following three aspects:

A： Accounting Information

Verify the reasonableness of accounting estimates (accounting analysis and quality of financial statements; financial analysis).

I： Industry Prospective

Consider the macroeconomic environment and industry trends, including the company’s competitive position in the industry.

M： Management Risk

Evaluate changes in management, shareholding structure, investment strategy, and risk preferences.

Warning ability/Discriminatory power (ROC)>90% or above:

Overall ROC of the TCRI™ in the past 10 years was 88%-97% and an average of 93%, which surpasses the standard of 70% in the Corporate Credit Rating Model Technical Manual.

TCRI™ default rate in the past 10 years:

The number of companies that default and default rate meet expectations. With a lower level (i.e., higher risk), the number of companies that default and the default rate increase.

Stability: One-year average transition matrix of TCRI™ (2000-2016)

On average 70%-80% of levels are maintained for 1 year, which is near the standards of S&P and Moody’s. Also, the relatively high fluctuation of high-risk levels meets expectations.

TCRI™ v.s. Other credit rating institutions