Models for Moody’s Bank Ratings
AbstractThe paper presents an econometric study of the two bank ratings assigned by Moody's Investors Service. According to Moody’s methodology, foreigncurrency long-term deposit ratings are assigned on the basis of Bank Financial Strength Ratings (BFSR), taking into account “external bank support factors” (joint-default analysis, JDA). Models for the (unobserved) external support are presented, and we find that models based solely on public information can approximate the ratings reasonably well. It appears that the observed rating degradation can be explained by the growth of the banking system as a whole. Moody’s has a special approach for banks in developing countries in general and for Russia in particular. The models help reveal the factors that are important for external bank support.
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Bibliographic InfoArticle provided by SKEMA Business School in its journal Frontiers in Finance and Economics.
Volume (Year): 8 (2011)
Issue (Month): 1 (April)
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Banks; Ratings; Rating model; Risk evaluation; Early Warning System;
Other versions of this item:
- Peresetsky, A. A. & Karminsky, A. M., 2011. "Models for Moody’s bank ratings," MPRA Paper 34864, University Library of Munich, Germany.
- Peresetsky , Anatoly & Karminsky, Alexander, 2008. "Models for Moody’s bank ratings," BOFIT Discussion Papers 17/2008, Bank of Finland, Institute for Economies in Transition.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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