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Abstract
Research background: The practical analysis suggests that credit ratings are especially significant for banks. The literature review suggests that in previous analysis researchers usually took into consideration financial factors of the banks? credit ratings methodology. This article analyses the impact of macroeconomic factors on the banks? credit ratings.Purpose of the article: The paper examines and analyses the impact of the macroeconomic risk factors on the credit ratings received by banks. In the article, the methodology of credit risk assessment proposed by Moody?s Investor Service and Standard and Poor?s Financial Service is presented. Two hypotheses are put herein. The first one is: Changes in countries? credit ratings convey new information and influence on banks? financial condition. The second hypothesis is: A highly-developed, stable economy with an advanced financial market has a positive influence on banks? credit rating assessment.Methods: The study used banks? and countries? ratings assigned by Standard and Poor's and Moody's for the period from 1 January 2005 to 1 January 2016. To verify the hypotheses static panel data models have been applied.Findings and Value added: In credit rating agencies guidelines and previous research, the impact of countries? credit ratings on those received by banks is not indicated. The impact of macroeconomic factors has not been verified. The analysis confirms that changes in countries? credit ratings convey new information and influence the banks? environment condition. But only for the assessment given by S and P the condition of banking sector is an important group of factors. For all verified types of credit ratings the risk of country is presented by countries? credit rating, not by particular factors. These analyses suggest that during the risk estimation process prepared by banks, a country?s risk represented by its credit ratings should be taken into consideration more often than particular macroeconomic factors.
Highlights
Credit ratings play an important role in the financial market
The analysis of the impact of all the mentioned macroeconomic factors suggests that the following determinants have a significant impact on banks’ credit ratings: Global Competitiveness Index, Worldwide Government Effectiveness Index, Worldwide Rule of Law Index, inflation and countries’ credit ratings proposed for a short term by Standard & Poor’s Investor Service Just as in the previous cases, there is a strong relationship between these two groups of credit ratings
Credit rating agencies and their risk assessment play an important role in the financial system of the economy
Summary
Credit ratings play an important role in the financial market. Strong credit ratings give banks greater access to capital markets on better financial terms. Banks’ credit ratings are important for borrowers, investors and supervisors because they assess the possibility of default. Some researchers suggest that there are differences between the notes given by particular credit rating agencies (Laere et al, 2012). The second hypothesis is: A highly-developed, stable economy with an advanced financial market has a positive influence on banks’ credit rating assessment. To verify the presented hypotheses, static panel data models have been used, taking into consideration macroeconomic variables that can influence countries’ long-term issuer credit ratings from 2005 to 2015
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