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A note on ratings of international banks

  • Roman Matousek
  • Chris Stewart

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.

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Article provided by Emerald Group Publishing in its journal Journal of Financial Regulation and Compliance.

Volume (Year): 17 (2009)
Issue (Month): 2 (May)
Pages: 146-155

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Handle: RePEc:eme:jfrcpp:v:17:y:2009:i:2:p:146-155
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