The Synergy of Rating Agencies' Efforts: Russian Experience

P. 93–110.

Karminsky A. M.

We examine the synergy of the credit rating agencies’ efforts. This
question is important not only for regulators, but also for commercial
banks if the implementation of the internal ratings and the advanced
Basel Approach are discussed. We consider Russian commercial banks
as a good example where proposal methods might be used. Firstly, a
literature overview was supplemented with an analysis of the activities
of rating agencies in Russia. Secondly, we discussed the methods and
algorithms of the comparison of rating scales. The optimization task
was formulated and the system of rating maps onto the basic scale was
obtained. As a result we obtained the possibility of a comparison of
different agencies’ ratings. We discussed not only the distance method,
but also an econometric approach. The scheme of correspondence
for Russian banks is presented and discussed. The third part of the
paper presents the results of econometric modeling of the international
agencies’ ratings, as well as the probability of default models for Russian
banks. The models were obtained from previous papers by the author,
but complex discussion and synergy of their systematic exploration
were this paper’s achievement. We consider these problems using the
example of financial institutions. We discuss the system of models and
their implementation for practical applications towards risk management
tasks, including those which are based on public information and a
remote estimation of ratings. We expect the use of such a systemic
approach to risk management in commercial banks as well as in
regulatory borders.

Keywords: mapping, rating agency. JEL: C25, credit rating, synergetic effects, econometric model

In book

Financial Econometrics and Empirical Market Microstructure

NY: Springer, 2015.