Credit Ratings, Private Information, and Bank Monitoring Ability

37 Pages Posted: 21 Jun 2016  

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Kasper Roszbach

Norges Bank - Research Department; University of Groningen - Faculty of Economics and Business; Sveriges Riksbank - Research Division

Date Written: 2016-06-16

Abstract

In this paper, we use credit rating data from two large Swedish banks to elicit evidence on banks' loan monitoring ability. For these banks, our tests reveal that banks' internal credit ratings indeed include valuable private information from monitoring, as theory suggests. Banks' private information increases with the size of loans.

Keywords: Monitoring, Banks, Credit Bureau, Private Information, Public Information, Ratings, Regulation, Supervision, Overconfidence

JEL Classification: D82, G18, G21, G24, G32, G33

Suggested Citation

Nakamura, Leonard I. and Roszbach, Kasper, Credit Ratings, Private Information, and Bank Monitoring Ability (2016-06-16). FRB of Philadelphia Working Paper No. 16-14. Available at SSRN: https://ssrn.com/abstract=2798538

Leonard I. Nakamura (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3804 (Phone)
215-574-4364 (Fax)

Kasper F. Roszbach

Norges Bank - Research Department ( email )

P.O. Box 1179
Oslo, N-0107
Norway

University of Groningen - Faculty of Economics and Business ( email )

Department of Economics, Econometrics and Finance
Nettelbosje 2
Groningen, NL 9747 AE
Netherlands

HOME PAGE: http://www.rug.nl/staff/k.f.roszbach/

Sveriges Riksbank - Research Division

Stockholm, SE 103 37
Sweden

HOME PAGE: http://www.riksbank.se/research/roszbach

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