Models for Moody’s bank ratings

Anatoly Peresetsky and Alexandr Karminsky

MPRA Paper from University Library of Munich, Germany

Abstract: The paper presents an econometric study of the two bank ratings assigned by Moody's Investors Service. According to Moody’s methodology, foreign-currency long-term deposit ratings are assigned on the basis of Bank Finan-cial 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 infor-mation can approximate the ratings reasonably well. It appears that the ob-served rating degradation can be explained by the growth of the banking sys-tem 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
New Economics Papers: this item is included in nep-ban and nep-rmg
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Citations: View citations in EconPapers (9)

Published in Frontiers in Finance and Economics 8.1(2011): pp. 88-110

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Related works:
Journal Article: Models for Moody’s Bank Ratings (2011)
Working Paper: Models for Moody's bank ratings (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34864

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