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A note on ratings of international banks

Author

Listed:
  • Roman Matousek
  • Chris Stewart

Abstract

Purpose - The purpose of this paper is to analyse the quantitative determinants of individual ratings of commercial banks (as conducted by Fitch Ratings). Design/methodology/approach - The ordered probit model is applied as an extension of the standard binary probit model. The model is estimated using a sample of 681 international banks. Findings - Banks with a greater capitalisation, larger assets, and a higher return on assets have higher bank ratings. Further, the greater is a bank's liquidity, the larger is its net interest margin and the more is the ratio of its operating expenses to total operating income the lower is a bank's rating. Originality/value - Modelling the determinants of international bank ratings spanning a sample of 90 countries. Applying a model with dynamics that considers whether the rating is determined by information up to four years prior to the rating date.

Suggested Citation

  • Roman Matousek & Chris Stewart, 2009. "A note on ratings of international banks," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 17(2), pages 146-155, May.
  • Handle: RePEc:eme:jfrcpp:v:17:y:2009:i:2:p:146-155
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    References listed on IDEAS

    as
    1. Carolyn Currie, 2003. "Towards a General Theory of Financial Regulation: Predicting, Measuring and Preventing Financial Crises," Working Paper Series 132, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
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    3. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2002. "Parametric and Nonparametric Volatility Measurement," NBER Technical Working Papers 0279, National Bureau of Economic Research, Inc.
    4. Andreas Jobst, 2007. "Operational Risk; The Sting is Still in the Tail But the Poison Dependson the Dose," IMF Working Papers 07/239, International Monetary Fund.
    5. Carolyn Currie, 2006. "A Test Of The Strategic Effect Of Basel Ii Operational Risk Requirements On Banks," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(4), pages 6-28, November.
    6. Kabir K. Dutta & David F. Babbel, 2002. "On Measuring Skewness and Kurtosis in Short Rate Distributions: The Case of the US Dollar London Inter Bank Offer Rates," Center for Financial Institutions Working Papers 02-25, Wharton School Center for Financial Institutions, University of Pennsylvania.
    7. Kabir K. Dutta & David F. Babbel, 2005. "Extracting Probabilistic Information from the Prices of Interest Rate Options: Tests of Distributional Assumptions," The Journal of Business, University of Chicago Press, vol. 78(3), pages 841-870, May.
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