A Research On Credit Risk Estimation Of Local Government Financing Vehicles

The government debt audit results announcement was released by State Auditing Administration on Dec.30, 2013, the issue about local government debt becomes hot once again. As a product of the reform of the fiscal and taxation system, the Local Government Financing Vehicles played a positive role in supporting local fundamental construction and improving people's livelihood. With the rapid growth of financing scale and quantity of this vehicle, the credit risk of its solvency is to be concerned gradually in recent years. The credit risk of Local Government Financing Vehicles is analyzed in this paper from the aspect of its financing behaviors. Nowadays, the main financing way of this vehicle is bank lending and City Construction Bond(Quasi-municipal Bond) . A specific and practical credit risk estimating system matched the local government financing vehicle is established by transforming KMV model. Based on the financial revenue and expenditure sample of Beijing government, the theoretical and Expected Default Frequency is obtained by empirical research calculation, this can provide theory reference for controlling the scale of local government financing platform. Considering participants and establishing effective evaluation methods of credit risk,countermeasures and suggestions are proposed in the end.The research result shows that the Expected Default Frequency of local government financing vehicles' loan and bond decreases remarkably by calculating endorsable local financial income and controlling financial scale, the purpose of preventing and controlling credit risk of local government financing vehicles can also be achieved.