Credit Debt Risk Events Are High, Debt Valuation Is Brewing, Loss Measurement Is New.

With the increase of credit default incidents, the measurement of credit default losses is also changing.

In twenty-first Century, the economic report reporters learned exclusively from the agencies close to the regulators that the central debt financing valuation Center Limited (hereinafter referred to as the central debt valuation) of the central government debt registration and Clearing Company Limited (hereinafter referred to as "Zhong Dun Deng") had recently convened some banks and brokerages to communicate, and gave a consultation on the expected way of measuring the credit losses.

The reporter learned that in the scheme, the debt valuation of the credit loss stage, implied default probability, default probability and default loss rate and other ways of deriving the corresponding views.

"The direction of this proposal is in order to better reflect the timeliness of credit and debt assets in the statements, and also to embody the accrual basis of the statements." An accountant close to China's debt valuation said.

Expected loss measurement "brewing"

In fact, the change in the way of impairment of credit losses around the international financial instruments was first initiated 5 years ago.

In July 2014, the international accounting standards board (IASB) issued IFRS ninth financial instruments (IFRS9).

"Model" is adjusted to "expected loss model".

Three years later, in 2017, the Ministry of Finance issued the "accounting standards for Enterprises No. 22, the confirmation and measurement of financial instruments" (CAS22), marking the direction and principles of IFRS9.

The so-called "expected credit loss" refers to the weighted average of the credit loss of the financial instruments, which is the default risk, and the credit loss refers to the difference between the cash flow of the contract or the contract and the expected cash flow.

In the industry view, this measurement method can more timely reflect the risk of credit assets holders.

According to the timetable, domestic and foreign listed companies, A share listed companies and non listed companies began to implement this requirement in January 2018, January 2019 and January 2021 respectively.

During this period, the Securities Association of China (hereinafter referred to as the China Securities Regulatory Commission) and the China Banking Association issued the guidelines on impairment of financial instruments of securities companies in September 2018 and August 2019 respectively (hereinafter referred to as "impairment of value").

Guidelines) and guidelines for valuation of commercial banks' financial products (Draft).

However, for many financial institutions, the measurement of credit losses at different stages and levels is also controversial and requires unified standards. This poses many challenges to financial institutions.

In the industry view, the implementation of the CAS22's impairment requirement has put forward higher requirements for the parameter determination ability of the institution, the construction of credit debt database, and the system development and maintenance.

"Credit loss involves more complicated parameters, such as how to divide the measurement stage according to the criteria, how to determine the probability of default, and how to make forward-looking adjustments." The movement of a public institution

"At the same time, the history of domestic bond default is relatively short, and there is a certain shortage of data sources and adequacy," he said.

It is not easy for the current domestic institutions to operate. "

In view of this pain point, the third party market organization represented by the central debt valuation has begun to set up a solution for the valuation method of credit loss.

Multiple factors outline

In twenty-first Century, the economic news reporter learned that in the plan for the evaluation of China's debt valuation, the division of the default stage, implied default probability, default probability, default loss rate and other conditions were explained.

For example, in the three stages of "credit risk is not significantly increased", "credit line significantly increased" and "credit risk reduction" has occurred, the valuation of the central debt has been adjusted through the "implicit rating of the debt market".

That is, the implicit rating of the debt market is not lower than that of the initial recognition, or the implied rating of the central debt market is higher than the lower credit risk (AA level) threshold. The first stage is the implicit rating of the debt market.

When the initial rating is lower than the first level and the above, the latest implicit debt rating in the central debt market is lower than the AA level, the second stage, while the implicit rating in the central debt market is down to C or the default is the third stage.

It is worth mentioning that if there is a bond that has already suffered credit impairment, the implicit rating of the debt market will be C at the initial confirmation. In addition, since the China Securities Regulatory Commission issued the guidelines on impairment in September last year,

The impairment of national debt, central bank card and certificate bond is close to zero. In the above medium debt valuation scheme, the scope of the impairment stage does not include such bonds.

The reason why the AA level is an important watershed in the threshold of stage division is that credit default probability often rises significantly in AA- and lower ratings. A close to middle debt valuer

In this regard, from the statistical results of historical default rate and implied default probability of Chinese debt, there is a big gap between the implicit rating AA and AA- class default probability in the debt market.

At the same time, the implicit bond default probability can be reflected and deduced from the bond price in the proposal of the central debt valuation, which is also a widely used method in the world, and it will also imply default probability.

As the basic information of default probability.

"The valuation of China's debt is based on the information of the bond market, reflecting the common judgement of the market on the expected default losses." Those close to the debt valuation said, "implied default probability has absorbed market gambling."

The bond price can reflect the change of credit risk in time and contain the market expectation information. Therefore, the implied default probability is chosen as the basis of default probability.

On the basis of the complete default probability formation method, we use the spread differential theory to calculate the value of the debt, and propose that the total interest rate of the risk-free interest rate, such as the national debt, can be deduced from the valuation of the debt securities at the same day.

In view of the deviation of credit, liquidity and market sentiment contained in the total interest rate, we should calculate and adjust the ratio of historical fair credit spread and total interest rate, and finally form a fair credit spread on coupons.

In terms of the loss rate, the middle debt proposed in the proposal the recommended value of the Basel Accord, that is, the default loss rate of the unsecured high-grade bonds is 45%, while the default loss rate of the subordinated debt is 75%.

"The whole scheme draws on some methods and methods of mature market countries, and at the same time, it also combines the credit situation of domestic bonds." A broker who is close to the valuation of China's debt valuation said, "this kind of measurement improvement can, to a certain extent, track the impact of credit risk changes on the balance sheet to a certain extent, and it can more scientifically prepare the value reduction for bonds, and it has a certain significance in the current high risk of credit default risk." (Editor: Wu Yan Ling)