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

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