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Credit Ratings of the Banking Sector

Nicole Jonker

WO Research Memoranda (discontinued) from Netherlands Central Bank, Research Department

Abstract: In this paper we analyse the credit rating transitions of banks in Europe, the United States and Japan by using a competing risks model. We have distinguished two types of rating transitions: upgrading and downgrading. We have used some bank characteristics, like country of domicile, type of bank, initial rating, as explanatory variables in our model. We have found that downgrading and upgrading are different types of processes. Downgrading is a memoryless process, whereas upgrading is not. The longer a rating has not changed, the higher the probability that it will be upgraded. Furthermore, the type of bank and country (Japan) matters in the downgrading process but not in the upgrading process. Banks which have a speculative rating show much more volatility in both upgrading and downgrading intensities than banks with an investment rating.

Keywords: credit ratings; banking; duration models (search for similar items in EconPapers)
JEL-codes: C41 G21 G39 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-rmg
Date: 2002-01
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:wormem:714

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