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.
Table of Contents
Basis and scope of the rating
Influence of TCRI™
The effectiveness of TCRI™ rating results is periodically validated.
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.
The rating is divided into 1-9 levels, and Default.
Manual determination mainly includes the following three aspects:
Verify the reasonableness of accounting estimates (accounting analysis and quality of financial statements; financial analysis).
Consider the macroeconomic environment and industry trends, including the company’s competitive position in the industry.
Evaluate changes in management, shareholding structure, investment strategy, and risk preferences.
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.
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.
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.