Abstract
The purpose of this article is to study empirically the bank credit risk rating (BCRR) process over time using 89 banks from 27 EMENA countries rated by S&P’s simultaneously before and after 2007-09 crises. We made this comparison based on the CAMELS model with a proposed ‘S’ to BCRR. We use "ordered logit" regression for the rating classes and we complete our analysis by “linear multiple” regression for the rating grades. The results show that the rating changes in 2012 are mainly a methodology revision consequence of the entire rating process changes, including the weight of components, the important factors and the relevant variables in order to take into account some of the lessons learned from this global crisis. They also show a consistence between the BCRR's revealed and practiced methodologies revised by the credit rating agencies (CRAs).
Highlights
The subprime crisis has prompted credit rating agencies to review their practices by revising their rating criteria and models and improving the transparency of the revealed methodologies of the bank credit risk rating (BCRR) (IMF, 2010; Packer & Tarashev, 2011)
The study of the evolution of BCRR's revealed methodologies based on the specific publications of the world's most renowned credit rating agencies (CRAs): S&P's, Moody's and FitchRatings (Damak & Chichti, 2017) have shown that, first, they have not been fundamentally disrupted since they are based on the same components, factors and information
The changes in the 2012 ratings are mainly the result of revisions to the entire rating process, including the weight of the components, important factors and relevant variables to take into account some of the lessons learned from this global crisis
Summary
The subprime crisis has prompted credit rating agencies to review their practices by revising their rating criteria and models and improving the transparency of the revealed methodologies of the BCRR (IMF, 2010; Packer & Tarashev, 2011). The study of the evolution of BCRR's revealed methodologies based on the specific publications of the world's most renowned CRAs: S&P's, Moody's and FitchRatings (Damak & Chichti, 2017) have shown that, first, they have not been fundamentally disrupted since they are based on the same components (intrinsic credit quality or internal factors, environmental support or external factors), factors (qualitative, quantitative) and information (public, private) They underwent modest but remarkable changes between the periods before and after the subprime crisis (Packer & Tarashev, 2011) which allowed for a more explicit examination of environmental support and improved coherence between the three CRAs. the revealed methodologies have become more transparent, but more complex. This work was limited to describing the evolution over time and space of the methodologies revealed before and after the Asian and the subprime crisis without a thorough econometric study to detect the methodologies practiced
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