Structural Shifts in Bank Credit Ratings

Antonis Ballis, Christos Ioannidis*, Emmanouil Sifodaskalakis

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We investigate the time variation in credit rating standards awarded to financial institutions of commercial bank credit ratings awarded by the three principal CRAs from 1990 to 2015 in a world-wide context by testing for well-defined structural shifts. We focus on the part of the ratings that cannot be accounted using publicly available information. We test whether major financial events are conditioning, ex-post such changes Distinctively in this paper’s timespan our analysis covers four periods: (i) before and (ii) after the 2001-2 corporate collapses, followed by (iii) before the global financial crisis and (iv) after the global financial crisis. We find substantial differences in the assignment of bank credit ratings among the three major agencies, Moody’s, Fitch, and S&P. Agencies differ both in terms of re-adjustment of ratings but also on the speed of response to the evens. All three agencies tightened ratings during the 2008 crisis and kept reducing them in its aftermath.
Original languageEnglish
Article number101272
JournalJournal of Financial Stability
Volume73
Early online date21 May 2024
DOIs
Publication statusE-pub ahead of print - 21 May 2024

Bibliographical note

Copyright © 2024 The Author(s). Published by Elsevier B.V. This is an open access article distributed under the terms of the Creative Commons Attribution License CC BY [https://creativecommons.org/licenses/by/4.0/], which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Keywords

  • Bank Ratings
  • Credit Rating Agencies
  • Ordered Logit
  • Structural Breaks

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