Bank Standalone Credit Ratings

International Journal of Central Banking, Forthcoming

44 Pages Posted: 26 Mar 2019 Last revised: 10 Apr 2019

See all articles by Michael R. King

Michael R. King

Gustavson School Of Business

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Nikola A. Tarashev

Bank for International Settlements (BIS) - Monetary and Economic Department

Multiple version iconThere are 2 versions of this paper

Date Written: March 8, 2019

Abstract

Standalone ratings measure a bank’s intrinsic financial strength but – unlike all-in ratings – do not incorporate potential sovereign or parent-bank support. On July 20, 2011, Fitch switched from a 9-point to a 21-point scale for their standalone ratings but did not alter their all-in ratings. We investigate if the stock market reacted to this refinement of public information about bank fundamentals. We find that shareholders rewarded (penalized) banks that received positive (negative) rating surprises. We also find that Fitch used the refinement to inflate standalone ratings, in particular for large banks, banks with low 9-point standalone ratings, and banks headquartered outside North America.

Suggested Citation

King, Michael Robert and Ongena, Steven R. G. and Tarashev, Nikola A., Bank Standalone Credit Ratings (March 8, 2019). International Journal of Central Banking, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3345619 or http://dx.doi.org/10.2139/ssrn.3345619

Michael Robert King

Gustavson School Of Business ( email )

University of Victoria
Business & Economics Building, Room 246
Victoria, British Columbia V8W 2Y2
Canada
250-721-6425 (Phone)

HOME PAGE: http://https://www.uvic.ca/gustavson/faculty/faculty/faculty/current/kingm.php

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Nikola A. Tarashev

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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