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Models for Moody’s Bank Ratings

Anatoly Peresetsky
Authors registered in the RePEc Author Service: Alexandr M. Karminsky ()

Frontiers in Finance and Economics, 2011, vol. 8, issue 1, 88-110

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.

Keywords: Banks; Ratings; Rating model; Risk evaluation; Early Warning System (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2011
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Related works:
Working Paper: Models for Moody’s bank ratings (2011) Downloads
Working Paper: Models for Moody's bank ratings (2008) Downloads
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