Prototype risk rating system

doi:10.1016/S0378-4266(00)00117-5

Prototype risk rating system

2001-01-01

79

PRE

AI

DOI：10.1016/S0378-4266(00)00117-5

Original

Original request for help

Save

Abstract

En 中文

This paper explores the traditional and prevalent approach to credit risk assessment the rating system. We first describe the rating systems of the two main credit rating agencies, Standard & Poor's and Moody's. Then we show how an internal rating system in a bank can be organized in order to rate creditors systematically. We suggest adopting a two-tier rating system. First. an obliger rating that can be easily mapped to a default probability bucket. Second, a facility rating that determines the loss parameters in case of default. such as (i) loss given default (LGD), which depends on the seniority of the facility and the quality of the gurantees, and (ii) usage given default (UGD) for loan commitments, which depends on the nature of the commitment and the rating history of the borrower. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification. G21; G33.

Keywords:

BIS

risk management

credit risk

credit ratings

Prototype risk rating system

Abstract

Journal

Organization