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Models for Moody’s Bank Ratings (Peresetsky A.A., Karminsky A.M.)

Bank Systems Ratings Risk-taking and Risk Management

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.
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Libref/ Peresetsky A.A., Karminsky A.M. (2011) "Models for Moody’s Bank Ratings", Frontiers in Finance and Economics , Vol. 1, No. 8 (2011): pp. 88-110
© Программирование — Александр Красильников, 2008
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