Counterpart risk rating is at the heart of the banking business. In the new Basel II regulation, internal ratings have been given a central role. Although much research has been done on external ratings, much less is known about banks´ internal ratings. This paper presents new quantitative...

The Internal Ratings Based (IRB) approach for capital determination is one of the cornerstones in the proposed revision of the Basel Committee rules for bank regulation. We evaluate the IRB approach using historical business loan portfolio data from a major Swedish bank for the period 1994 to...

In credit risk management migration matrices are major inputs for many applications, including the determination of Value-at-Risk or derivative pricing. After reviewing distance measures for migration matrices we motivate and propose new directed difference indices to measure changes in...

In credit markets, screening algorithms discriminate between good-type and bad-type borrowers. This is their raison d’être. However, by doing so, they also often discriminate between individuals sharing a protected attribute (e.g. gender, age, race) and the rest of the population. In this...

This paper discusses the role of the credit rating agencies during the recent financial crises. In particular, it examines whether the agencies can add to the dynamics of emerging market crises. Academics and investors often argue that sovereign credit ratings are responsible for pronounced...

Through-the-Cycle EDF (TTC EDF) credit measures are one-year probabilities of default that are largely free of the effect of the aggregate credit cycle, primarily reflecting a firm's enduring, long-run credit risk trend. TTC EDF measures are useful in applications in which a stable PD input is...

This research examines the impacts of Credit Rating Agencies (CRAs) on bank performance in general, and in particular how their impacts can be moderated by bank regulation strictness and investor protection quality embedded in different institutional environments. Using 2398 observations from...

In this paper, we examine the role of information sharing and borrower legal rights in affecting the procyclical effect of bank loan loss provisions. Based on a sample of Asian banks, our empirical results highlight that higher non-discretionary provisions reduce loan growth and hence,...