Matousek, Roman and Stewart, Chris (2009) A note on ratings of international banks. Journal of Financial Regulation and Compliance, 17(2), pp. 146-155. ISSN (print) 1358-1988

Abstract

The purpose of this paper is to analyse the quantitative determinants of individual ratings of commercial banks (as conducted by Fitch Ratings). The ordered probit model is applied as an extension of the standard binary probit model. The model is estimated using a sample of 681 international banks. Banks with a greater capitalisation, larger assets, and a higher return on assets have higher bank ratings. Further, the greater is a bank's liquidity, the larger is its net interest margin and the more is the ratio of its operating expenses to total operating income the lower is a bank's rating. Modelling the determinants of international bank ratings spanning a sample of 90 countries. Applying a model with dynamics that considers whether the rating is determined by information up to four years prior to the rating date.

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