How Consistent are Credit Ratings? A Geographic and Sectoral Analysis of Default Risk

22 Pages Posted: 13 Jul 2000

See all articles by John Ammer

John Ammer

U.S. Federal Reserve Board of Governors

Frank Packer

Bank for International Settlements (BIS)

Date Written: June 2000

Abstract

We examine differences in default rates by sector and obligor domicile. We find evidence that credit ratings have been imperfectly calibrated across issuer sectors in the past. Controlling for year of issue and rating, default rates appear to be higher for U.S. financial firms than for U.S. industrial firms. Sectoral differences in recovery rates do not offset the higher default rates. By contrast, we do not find significant differences in default rates between U.S. and foreign firms.

Keywords: Bonds, rating agencies, capital requirements, Basel Committee on Banking Supervision

JEL Classification: G20

Suggested Citation

Ammer, John Matthew and Packer, Frank, How Consistent are Credit Ratings? A Geographic and Sectoral Analysis of Default Risk (June 2000). FRB International Finance Discussion Paper No. 668. Available at SSRN: https://ssrn.com/abstract=232909 or http://dx.doi.org/10.2139/ssrn.232909

John Matthew Ammer (Contact Author)

U.S. Federal Reserve Board of Governors ( email )

20th & C Streets NW
Washington, DC 20551
United States
202-452-2349 (Phone)
202-452-6424 (Fax)

Frank Packer

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
4161 280 8449 (Phone)

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