In this paper we develop a model of the economic value of a credit rating system. Increasing international competition and changes in the regulatory framework driven by the Basel Committee on Banking Supervision (Basel II) called forth incentives for banks to improve their credit rating systems. An improvement of the statistical power of a rating system decreases the potential effects of adverse selection, and, combined with meeting several qualitative standards, decreases the amount of regulatory capital requirements. As a consequence, many banks have to make investment decisions where they have to consider the costs and the potential benefits of improving their rating systems. In our model the quality of a rating system depends on several parameters such as the accuracy of forecasting individual default probabilities and the rating class structure. We measure effects of adverse selection in a competitive one-period framework by parametrizing customer elasticity. Capital requirements are obtained by applying the current framework released by the Basel Committee on Banking Supervision. Results of a numerical analysis indicate that improving a rating system with low accuracy to medium accuracy can increase the annual rate of return on a portfolio by 30 to 40 bp. This effect is even stronger for banks operating in markets with high customer elasticity and high loss rates. Compared to the estimated implementation costs banks could have a strong incentive to invest in their rating systems. The potential of reduced capital requirements on the portfolio return is rather weak compared to the effect of adverse selection.
本文建立了一个信用评级系统的经济价值模型。在巴塞尔银行监管委员会(Basel Committee on Banking Supervision，简称Basel II)的推动下，国际竞争的加剧和监管框架的变化，促使银行采取激励措施，改善其信用评级体系。提高评级系统的统计能力可以减少逆向选择的潜在影响，并与满足若干定性标准相结合，减少监管资本要求的数量。因此，许多银行在做出投资决策时，必须考虑改善评级体系的成本和潜在收益。在我们的模型中，评级系统的质量取决于几个参数，如预测单个违约概率的准确性和评级类结构。我们通过参数化顾客弹性来衡量竞争周期框架下逆向选择的影响。资本要求是通过应用巴塞尔银行监管委员会发布的现行框架获得的。数值分析结果表明，将准确度较低的评级系统改进为中等准确度，可使投资组合的年回报率提高30 ~ 40个基点。对于那些在高客户弹性和高损失率市场运营的银行来说，这种影响甚至更大。与估计的实施成本相比，银行可能有强烈的动机投资于自己的评级体系。与逆向选择的影响相比，降低资本要求对投资组合回报的潜在影响相当弱。
{"title":"Modelling the Economic Value of Credit Rating Systems","authors":"Rainer Jankowitsch, W. Schwaiger, Stefan Pichler","doi":"10.2139/ssrn.675668","DOIUrl":"https://doi.org/10.2139/ssrn.675668","url":null,"abstract":"In this paper we develop a model of the economic value of a credit rating system. Increasing international competition and changes in the regulatory framework driven by the Basel Committee on Banking Supervision (Basel II) called forth incentives for banks to improve their credit rating systems. An improvement of the statistical power of a rating system decreases the potential effects of adverse selection, and, combined with meeting several qualitative standards, decreases the amount of regulatory capital requirements. As a consequence, many banks have to make investment decisions where they have to consider the costs and the potential benefits of improving their rating systems. In our model the quality of a rating system depends on several parameters such as the accuracy of forecasting individual default probabilities and the rating class structure. We measure effects of adverse selection in a competitive one-period framework by parametrizing customer elasticity. Capital requirements are obtained by applying the current framework released by the Basel Committee on Banking Supervision. Results of a numerical analysis indicate that improving a rating system with low accuracy to medium accuracy can increase the annual rate of return on a portfolio by 30 to 40 bp. This effect is even stronger for banks operating in markets with high customer elasticity and high loss rates. Compared to the estimated implementation costs banks could have a strong incentive to invest in their rating systems. The potential of reduced capital requirements on the portfolio return is rather weak compared to the effect of adverse selection.","PeriodicalId":410187,"journal":{"name":"FEN: Institutions & Financing Practices (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128309941","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper is concerned with the ownership structure of corporate debt from an institutional perspective. We try to identify the factors affecting bank debt use from an international sample of companies from Austria, Germany, Japan, Belgium, France, Italy, Holland, Spain, Portugal, Finland, Sweden and the USA. Our results show that bank debt depends both on factors specific to each company and on institutional features of each country. More exactly, we find that bank loans are related to firm size, to the quality and risk of the projects, and to the collateral. We also find a number of legal-institutional factors impacting on the source of firms' debt, such as creditor protection, firm disclosure requirements and law enforcement.
{"title":"Debt Ownership Structure and Legal System: An International Analysis","authors":"F. López-Iturriaga","doi":"10.2139/ssrn.411701","DOIUrl":"https://doi.org/10.2139/ssrn.411701","url":null,"abstract":"This paper is concerned with the ownership structure of corporate debt from an institutional perspective. We try to identify the factors affecting bank debt use from an international sample of companies from Austria, Germany, Japan, Belgium, France, Italy, Holland, Spain, Portugal, Finland, Sweden and the USA. Our results show that bank debt depends both on factors specific to each company and on institutional features of each country. More exactly, we find that bank loans are related to firm size, to the quality and risk of the projects, and to the collateral. We also find a number of legal-institutional factors impacting on the source of firms' debt, such as creditor protection, firm disclosure requirements and law enforcement.","PeriodicalId":410187,"journal":{"name":"FEN: Institutions & Financing Practices (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125130968","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Discusses excess capacity in the banking industry in the United States and its consolidation. Bank definitions; Bank growth and competition; Profitability.
讨论美国银行业的过剩产能及其整合。银行的定义;银行成长与竞争;盈利能力。
{"title":"Excess Capacity in Banking: Fact or Fiction?","authors":"B. Gup, Pankaj Agrrawal","doi":"10.2139/ssrn.2628587","DOIUrl":"https://doi.org/10.2139/ssrn.2628587","url":null,"abstract":"Discusses excess capacity in the banking industry in the United States and its consolidation. Bank definitions; Bank growth and competition; Profitability.","PeriodicalId":410187,"journal":{"name":"FEN: Institutions & Financing Practices (Topic)","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126244195","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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