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Why Do Supervisors Rate Banking Organizations?

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Abstract

This article addresses a question that at first may appear simple: why do supervisors rate banking organizations? Prudential supervisors have a long-standing practice of confidentially rating the condition of the firms that they supervise. These ratings are used for a variety of purposes and can have important consequences. The authors analyze the history and evolution of this practice and consider how the use of ratings advances the statutory and regulatory goals of supervision of banking organizations. They conclude with a discussion of the implications for the design and implementation of bank ratings systems.

Suggested Citation

  • James Bergin & Kevin J. Stiroh, 2021. "Why Do Supervisors Rate Banking Organizations?," Economic Policy Review, Federal Reserve Bank of New York, vol. 27(3), pages 1-27, November.
    • Handle: RePEc:fip:fednep:93412
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    More about this item

    Keywords

    bank ratings; banks; financial institutions; bank supervision; bank regulation; financial regulations; risk assessment;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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