What is credit enhancement?
Our simple understanding is to increase trust. When an enterprise wants to apply for a business loan in a bank, the credit rating of the enterprise is insufficient, the loan amount is small and the interest is high.
Enterprises will introduce guarantee companies or high-quality enterprises to guarantee their own loans and increase their credit rating. Another meaning is to improve the credit rating of financial products.
Credit enhancement has another meaning, which is to improve the credit rating of financial products, thus reducing the credit risk of debtors. Widely used in trust loans, bond issuance, bank loans and other financial services.
Third-party guarantee Third-party guarantee is also a kind of guarantee, which belongs to external credit enhancement measures. At present, it is relatively common and universal, and the Guarantee Law is applicable.
With a third party as a guarantee, the risk can be transferred, and the guarantor also needs to bear certain risks, if the debtor fails to perform relevant obligations;
Then the guarantor needs to make compensation or payment on his behalf, and can also use real estate, land, stocks, etc. As collateral or pledge.
Guarantee is widely used in bank loans and securities issuance, and its operation method is relatively simple.
Buying an insurance financial platform and cooperating with insurance companies to provide insurance schemes for financing projects on the platform can reduce the risks of financial platforms and is also a common way to increase credit.
If the enterprise does not have a third-party company or guarantee company with good credit rating to guarantee, it can choose this method.
Risk reserve platform needs to set up risk reserve. Once the investment project suffers losses, the risk reserve can be used for compensation.
The two sides of the credit default swap transaction have reached an agreement or contract, and the buyer needs to pay a certain fee to the seller, which will be determined according to the market and risk.
Once the credit risk occurs, the economic losses caused to loans or securities will be compensated. The above is the content of the letter. As the name implies, credit enhancement is to improve the credit rating.
Mainly used for trust loans, bank loans, bond issuance and other financial services.