Assessing methodology of banks' ratings and their competitive positions: overview of main rating agencies

Abstract

This paper analyzes methodologies of credit rating assessment of major rating agencies, with the focus on Fitch Ratings (Fitch). The methodology data were collected from Fitch Ratings. Also, the article review international literacy for factors and indicators adequacy in rating assessments. The purpose of this research is to overview literacy for the primary methodologies of banks' credit rating assessment. It was explained that ratios from financial indicators are most important for credit rating assessment. In some cases, in sovereign countries, support and macroeconomic factors are significant. We concluded that this area is still not enough researched and that in the future, the number of studies will appear with different methodological proposals and improvements.

The Relationship between Credit Rating and Environmental, Social, and Governance Score in Banking

“…Panel data analysis is another common approach, as seen in Liu et al (2022) and Abdul Abdul Razak et al (2020), who use dynamic panel models to control for time-invariant characteristics and enhance the robustness of their findings. Qualitative assessments, like those conducted by Grigorieva and Vukovic (2020), provide a detailed understanding of the methodologies and factors used by rating agencies, emphasizing the importance of qualitative measures such as management quality and operational environment. Moreover, hybrid approaches are seen in studies like Brogi et al (2022) and Singh and Jaiwani (2023), which combine multiple techniques to provide a more comprehensive analysis.…”