Confirmation of the rating before revocation of the rating reflects S&P's expectation that Sino will maintain its very strong competitive position and its established stable channels for obtaining external liquidity and capital. These factors will help to reduce the impact of investment risk and its weaker capital level than before.
Standard & Poor's believes that Zhonghe has rich experience in cultivating the local market, and effectively limits its loss exposure by virtue of its collateral management ability, helping it to have a sustainable competitive advantage compared with local competitors. The guarantee business of this bond insurance company is mainly based on local government financing platform, and S&P believes that the risk of its business portfolio is lower than that of other bond insurance companies focusing on small and medium-sized enterprises.
20 18 After China Banking and Insurance Regulatory Commission issued a new regulatory framework in April, the business risk coefficient of local government financing platforms rose sharply from 33% to 100%, which led to the weakening of the capital level of guaranteed capital under the regulatory caliber. The launch of the new framework mainly reflects that the China government has taken various measures to ensure that SMEs can obtain continuous financing support and liquidity support. However, Standard & Poor's believes that the company is unlikely to be subject to regulatory intervention, because the regulatory framework is still in a transitional stage, and Zhonghe Guarantee is actively managing its business portfolio. In addition, with the exposure of the local government financing platform business guaranteed by Sino-Union from 20 19 to 2020, the business scale has shrunk and the allocation ratio of high-risk assets has decreased. S&P believes that the capital level guaranteed by Sino-Union is also expected to recover in the medium term.