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Models for Moody’s Bank Ratings

Author

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  • Anatoly Peresetsky, Alexander Karminsky

    (Higher School of Economics, Moscow)

Abstract

The 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.

Suggested Citation

  • Anatoly Peresetsky, Alexander Karminsky, 2011. "Models for Moody’s Bank Ratings," Frontiers in Finance and Economics, SKEMA Business School, vol. 8(1), pages 88-110, April.
    • Handle: RePEc:ffe:journl:v:8:y:2011:i:1:p:88-110
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    2. Alexander Karminsky & Richard Hainsworth & Vasily Solodkov, 2013. "Arm’s Length Method for Comparing Rating Scales," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 114-135, December.
    3. Zhivaikina, A. & Peresetsky, A., 2017. "Russian Bank Credit Ratings and Bank License Withdrawal 2012-2016," Journal of the New Economic Association, New Economic Association, vol. 36(4), pages 49-80.
    4. Alexander M. Karminsky & Ella Khromova, 2016. "Modelling banks’ credit ratings of international agencies," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 341-363, December.
    5. Jarko Fidrmuc & Philipp J. Süss, 2011. "The Outbreak of the Russian Banking Crisis," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(1), pages 046-063, March.
    6. Peresetsky, A. A., 2011. "What factors drive the Russian banks license withdrawal," MPRA Paper 41507, University Library of Munich, Germany.
    7. Petr Gurný & Martin Gurný, 2013. "Comparison of Credit Scoring Models on Probability of Default Estimation for Us Banks," Prague Economic Papers, Prague University of Economics and Business, vol. 2013(2), pages 163-181.
    8. Veronika Belousova & Alexander Karminsky & Ilya Kozyr, 2018. "The macroeconomic and institutional determinants of the profit efficiency frontier for Russian banks," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 49, pages 91-114.
    9. Alexander Karminsky, 2016. "Rating models: emerging market distinctions," Papers 1607.02422, arXiv.org.
    10. Karminsky, A. & Sosyurko, V., 2011. "Comparison of Bank Credit Ratings for Various Agencies," Journal of the New Economic Association, New Economic Association, issue 12, pages 102-123.

    More about this item

    Keywords

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    JEL classification:

    • 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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