scholarly journals Competitiveness and Concentration of the Banking Sector as a Measure of Banks’ Credit Ratings

2018 ◽  
pp. 121-134
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Banking Sector ◽  
Credit Ratings

scholarly journals Macroeconomic aspects of banks’ credit ratings

Equilibrium ◽  
2017 ◽  
Vol 12 (1) ◽  
pp. 101 ◽  
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Banking Sector ◽  
Credit Rating ◽  
Risk Estimation ◽  
Credit Ratings ◽  
Value Added ◽  
Positive Influence ◽  
Macroeconomic Factors ◽  
New Information ◽  
Standard And Poor's ◽  
The Impact

Research background: The practical analysis suggests that credit ratings are especially significant for banks. The literature review suggests that in previous analysis researchers usually took into consideration financial factors of the banks’ credit ratings methodology. This article analyses the impact of macroeconomic factors on the banks’ credit ratings. Purpose of the article: The paper examines and analyses the impact of the macroeconomic risk factors on the credit ratings received by banks. In the article, the methodology of credit risk assessment proposed by Moody’s Investor Service and Standard and Poor’s Financial Service is presented. Two hypotheses are put herein. The first one is: Changes in countries’ credit ratings convey new information and influence on banks’ financial condition. The second hypothesis is: A highly-developed, stable economy with an advanced financial market has a positive influence on banks’ credit rating assessment. Methods: The study used banks’ and countries’ ratings assigned by Standard and Poor's and Moody's for the period from 1 January 2005 to 1 January 2016. To verify the hypotheses static panel data models have been applied. Findings and Value added: In credit rating agencies guidelines and previous research, the impact of countries’ credit ratings on those received by banks is not indicated. The impact of macroeconomic factors has not been verified. The analysis confirms that changes in countries’ credit ratings convey new information and influence the banks’ environment condition. But only for the assessment given by S and P the condition of banking sector is an important group of factors. For all verified types of credit ratings the risk of country is presented by countries’ credit rating, not by particular factors. These analyses suggest that during the risk estimation process prepared by banks, a country’s risk represented by its credit ratings should be taken into consideration more often than particular macroeconomic factors.

scholarly journals Current approaches to the analysis of the borrowers’ creditworthiness: Ukrainian and World experience

2019 ◽  
Vol 3 (1) ◽  
pp. 48-55
Author(s):  
Inna Khomenko ◽  
Iryna Sadchykova ◽  
Yuliia Krasnianska
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Banking Sector ◽  
Credit Ratings ◽  
Banking System ◽  
Financial Economic ◽  
The State ◽  
General Idea ◽  
Leading Role ◽  
Almost All

Introduction. Non-repayment of loans by borrowers not only jeopardizes the profitability of banking structures, but also the ability to calculate them under liabilities - deposit and borrowed funds. This situation is dangerous for the entire banking sector of the country, as it raises a number of acute problems: imbalance of loan and deposit portfolio by volumes and terms; distrust of the population to commercial banks, financial destabilization in the state as a whole, and others like that. Aim and tasks. The main purpose of this work is to study modern domestic and foreign approaches to assessing the creditworthiness of borrowers. Results. Based on the analysis of the definitions it is expedient to use the following interpretation of the term "creditworthiness": the financial, economic and legal capacity of the borrower to obtain a loan and return it to the commercial bank in accordance with the terms and conditions of the agreement. At the initial stages of the methodologies developing for the analysis of borrowers' lending, the leading role was played by the coefficient method, which by its nature is considered the simplest and is currently used as an express evaluation and preceded by other research. Currently, almost all commercial banks use a rating approach to assess the borrower's creditworthiness. Such methods also include calculation of coefficients, but contain a predictive component. The rating approach is valuable, because it requires a constant collection of updated information. Often, banks when building credit ratings use the methods of the relevant agencies. It is now believed that the formation of credit ratings allows you to get the most general idea of the borrower's creditworthiness (at the level of the commercial bank) and about the quality of the loan portfolio (at the level of the banking system of the state). Moreover, when assessing the creditworthiness of borrowers – individuals, the rating approach is most often used. Conclusions. The conducted studies indicate that improving approaches to assessing the creditworthiness of borrowers by commercial banks is particularly relevant for Ukraine. It is important to carry out measures (including administrative) in order to increase the reliability of the input information of borrowers, training of specialized specialists – experts, assessment of qualitative data on the debtor, formation of constantly updated statistical databases, adjustment of methodological developments taking into consideration the variability of the economic situation in Ukraine, ensuring transparency of the analysis, etc.

scholarly journals Assessing the Basel II internal ratings-based approach

2016 ◽  
Vol 24 (2) ◽  
pp. 106-139 ◽  
Author(s):  
Silvio Tarca ◽  
Marek Rutkowski
Keyword(s):  
Risk Factor ◽  
Financial Crisis ◽  
Banking Sector ◽  
Credit Ratings ◽  
Basel Ii ◽  
Mild Stress ◽  
Content Type ◽  
Macroeconomic Indicators ◽  
The Impact ◽  
Irb Approach

Purpose This study aims to render a fundamental assessment of the Basel II internal ratings-based (IRB) approach by taking readings of the Australian banking sector since the implementation of Basel II and comparing them with signals from macroeconomic indicators, financial statistics and external credit ratings. The IRB approach to capital adequacy for credit risk, which implements an asymptotic single risk factor (ASRF) model, plays an important role in protecting the Australian banking sector against insolvency. Design/methodology/approach Realisations of the single systematic risk factor, interpreted as describing the prevailing state of the Australian economy, are recovered from the ASRF model and compared with macroeconomic indicators. Similarly, estimates of distance-to-default, reflecting the capacity of the Australian banking sector to absorb credit losses, are recovered from the ASRF model and compared with financial statistics and external credit ratings. With the implementation of Basel II preceding the time when the effect of the financial crisis of 2007-2009 was most acutely felt, the authors measure the impact of the crisis on the Australian banking sector. Findings Measurements from the ASRF model find general agreement with signals from macroeconomic indicators, financial statistics and external credit ratings. This leads to a favourable assessment of the ASRF model for the purposes of capital allocation, performance attribution and risk monitoring. The empirical analysis used in this paper reveals that the recent crisis imparted a mild stress on the Australian banking sector. Research limitations/implications Given the range of economic conditions, from mild contraction to moderate expansion, experienced in Australia since the implementation of Basel II, the authors cannot attest to the validity of the model specification of the IRB approach for its intended purpose of solvency assessment. Originality/value Access to internal bank data collected by the prudential regulator distinguishes this paper from other empirical studies on the IRB approach and financial crisis of 2007-2009. The authors are not the first to attempt to measure the effects of the recent crisis, but they believe that they are the first to do so using regulatory data.

scholarly journals Location of banks and their credit ratings

2015 ◽  
Vol 16 (3) ◽  
pp. 220-232 ◽  
Author(s):  
Eric van Loon ◽  
Jakob de Haan
Keyword(s):  
Monetary Union ◽  
Euro Area ◽  
Sovereign Debt ◽  
Banking Sector ◽  
Credit Rating ◽  
Debt Crisis ◽  
Credit Ratings ◽  
External Support ◽  
Present Evidence ◽  
Content Type

Purpose – This paper aims to examine whether credit ratings of banks are related to their location, i.e. inside or outside the Euro Area. Design/methodology/approach – The authors estimate a multilevel ordered probit model for banks’ credit ratings in 2011 and control for bank-specific factors. They use the overall ratings and the external support ratings provided by Fitch as the dependent variable. Findings – Banks located in Euro Area member countries, on average, receive a higher credit rating from Fitch than banks located outside the Euro Area. Evidence for a “too-big-to-fail” and a “too-big-to-rescue” effect was also found. Research limitations/implications – The monetary union effect on banks’ credit ratings may be affected by the period under investigation. The ratings refer to August 2011, when the European sovereign debt crisis was at its height. This implies that, if anything, the Economic and Monetary Union (EMU) effect is underestimated. Practical implications – Large banks in the Euro Area receive higher credit ratings, so they have a competitive advantage over small banks located outside the Euro Area. Social implications – The present evidence suggests that small European countries with an extensive banking sector will be better off if they are member of the European EMU. Originality/value – The relationship between location of banks and their credit ratings has hardly been researched before. The present evidence is directly related to a debate in the literature on this issue.

The Systemic Effects of Prudential Regulation Toughening:The Results of a Stress-test for Russian Banks

2012 ◽  
pp. 4-31 ◽  
Author(s):  
M. Mamonov ◽  
A. Pestova ◽  
O. Solntsev
Keyword(s):  
Financial Services ◽  
Banking Sector ◽  
Stress Test ◽  
Credit Market ◽  
Capital Adequacy ◽  
Government Support ◽  
Government Ownership ◽  
Prudential Regulation ◽  
The Government ◽  
The Stability

The stability of Russian banking sector is threatened by three negative tendencies - overheating of the credit market, significant decrease of banks capital adequacy ratios, and growing problems associated with banks lending to affiliated non-financial corporations. The co-existence of these processes reflects the crisis of the model of private investments in Russian banking sector, which was observed during the last 20 years. This paper analyzes the measures of the Bank of Russia undertaken to maintain the stability of the banking sector using the methodology of credit risk stress-testing. Based on this methodology we conclude that the Bank of Russias actions can prevent the overheating of the credit market, but they can also lead to undesirable effects: further expansion of the government ownership in Russian banking sector and substitution of domestic credit supply by cross-border corporate borrowings. The later weakens the competitive positions of Russian banks. We propose a set of measures to harmonize the prudential regulation of banks. Our suggestions rely on design and further implementation of the programs aimed at developing new markets for financial services provided by Russian banks to their corporate and retail customers. The estimated effects of proposed policy measures are both the increase in profitability and capitalization of Russian banks and the decrease of banks demand for government support.

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