A note on ratings of international banks

Abstract

Purpose

The purpose of this paper is to analyse the quantitative determinants of individual ratings of commercial banks (as conducted by Fitch Ratings).

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Citation

Matousek, R. and Stewart, C. (2009), "A note on ratings of international banks", Journal of Financial Regulation and Compliance, Vol. 17 No. 2, pp. 146-155. https://doi.org/10.1108/13581980910952586