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Are Bank Ratings Coherent with Bank Default Probabilities in Emerging Market Economies ?

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  • Christophe Godlewski

    (LaRGE, Institut d'Etudes Politiques, Université Robert Schuman, Strasbourg 3)

Abstract

In this paper we investigate the coherence between bank ratings and default probability in emerging market economies using scoring and mapping techniques. In order to achieve its disciplining role, the rating should be coherent with the default risk it summarizes and disseminate. This issue is particularly crucial in emerging economies where under-developed financial markets, banking sector accrued opacity, and inadequate regulatory, institutional and legal environment affect banker’s risk taking behavior and bank’s default risk. Scoring results show a correct quantification of agency rating grades and thus their coherence. Mapping results show a tendency of the rating to aggregate bank’s default risk information into intermediate low category grades.

Suggested Citation

  • Christophe Godlewski, 2004. "Are Bank Ratings Coherent with Bank Default Probabilities in Emerging Market Economies ?," Finance 0409023, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0409023
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    1. repec:zbw:bofitp:2004_021 is not listed on IDEAS
    2. Anatoly Peresetsky & Alexandr Karminsky & Sergei Golovan, 2011. "Probability of default models of Russian banks," Economic Change and Restructuring, Springer, vol. 44(4), pages 297-334, November.
    3. Anatoly Peresetsky & Alexandr Karminsky & Sergei Golovan, 2011. "Probability of default models of Russian banks," Economic Change and Restructuring, Springer, vol. 44(4), pages 297-334, November.
    4. Пересецкий А.А., 2007. "Методы Оценки Вероятности Дефолта Банков," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 43(3), июль.

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    More about this item

    Keywords

    emerging market economies; default probability; bank rating; scoring and mapping methods;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • F39 - International Economics - - International Finance - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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