An Analysis of Ratings of Russian Banks

A.H.O. van Soest, A. Peresetsky, A.M. Karminsky

Research output: Working paperDiscussion paperOther research output

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Abstract

Since the recent financial crisis, both the Russian business community and foreign investors have started to make more and more use of ratings of the reliability of Russian banks, i.e., their ability to meet interest and repayment commitments to the investors.In response to this, the number of rating agencies has increased over the past few years.In this paper, existing ratings are analyzed and compared using ordered probit models that explain bank ratings from bank characteristics such as size indicators and financial ratios characterizing profitability, or default risk on loans given.Moreover, on the basis of a survey among financial experts, models for expert ratings are constructed and results are compared to those for the agency ratings.We find that agency and expert ratings of virtual banks are largely in line with each other, but there are also some differences.For example, liquidity measures are important for agency ratings but insignificant for the expert ratings.Moreover, we find some surprising differences between expert ratings of real banks and expert ratings of virtual banks.While overdue loans are important for the virtual banks, they play no role in either the agency ratings or the expert ratings of real banks.An explanation may be that banks manage to mask the actual number of overdue loans.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages24
Volume2003-85
Publication statusPublished - 2003

Publication series

NameCentER Discussion Paper
Volume2003-85

Fingerprint

Rating
Rating agencies
Loans
Ordered probit model
Foreign investors
Investors
Financial crisis
Financial ratios
Default risk
Profitability
Liquidity

Keywords

  • banks
  • financial crisis
  • agencies
  • reliability
  • Russia

Cite this

van Soest, A. H. O., Peresetsky, A., & Karminsky, A. M. (2003). An Analysis of Ratings of Russian Banks. (CentER Discussion Paper; Vol. 2003-85). Tilburg: Econometrics.
van Soest, A.H.O. ; Peresetsky, A. ; Karminsky, A.M. / An Analysis of Ratings of Russian Banks. Tilburg : Econometrics, 2003. (CentER Discussion Paper).
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van Soest, AHO, Peresetsky, A & Karminsky, AM 2003 'An Analysis of Ratings of Russian Banks' CentER Discussion Paper, vol. 2003-85, Econometrics, Tilburg.

An Analysis of Ratings of Russian Banks. / van Soest, A.H.O.; Peresetsky, A.; Karminsky, A.M.

Tilburg : Econometrics, 2003. (CentER Discussion Paper; Vol. 2003-85).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - An Analysis of Ratings of Russian Banks

AU - van Soest, A.H.O.

AU - Peresetsky, A.

AU - Karminsky, A.M.

N1 - Pagination: 24

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N2 - Since the recent financial crisis, both the Russian business community and foreign investors have started to make more and more use of ratings of the reliability of Russian banks, i.e., their ability to meet interest and repayment commitments to the investors.In response to this, the number of rating agencies has increased over the past few years.In this paper, existing ratings are analyzed and compared using ordered probit models that explain bank ratings from bank characteristics such as size indicators and financial ratios characterizing profitability, or default risk on loans given.Moreover, on the basis of a survey among financial experts, models for expert ratings are constructed and results are compared to those for the agency ratings.We find that agency and expert ratings of virtual banks are largely in line with each other, but there are also some differences.For example, liquidity measures are important for agency ratings but insignificant for the expert ratings.Moreover, we find some surprising differences between expert ratings of real banks and expert ratings of virtual banks.While overdue loans are important for the virtual banks, they play no role in either the agency ratings or the expert ratings of real banks.An explanation may be that banks manage to mask the actual number of overdue loans.

AB - Since the recent financial crisis, both the Russian business community and foreign investors have started to make more and more use of ratings of the reliability of Russian banks, i.e., their ability to meet interest and repayment commitments to the investors.In response to this, the number of rating agencies has increased over the past few years.In this paper, existing ratings are analyzed and compared using ordered probit models that explain bank ratings from bank characteristics such as size indicators and financial ratios characterizing profitability, or default risk on loans given.Moreover, on the basis of a survey among financial experts, models for expert ratings are constructed and results are compared to those for the agency ratings.We find that agency and expert ratings of virtual banks are largely in line with each other, but there are also some differences.For example, liquidity measures are important for agency ratings but insignificant for the expert ratings.Moreover, we find some surprising differences between expert ratings of real banks and expert ratings of virtual banks.While overdue loans are important for the virtual banks, they play no role in either the agency ratings or the expert ratings of real banks.An explanation may be that banks manage to mask the actual number of overdue loans.

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KW - financial crisis

KW - agencies

KW - reliability

KW - Russia

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BT - An Analysis of Ratings of Russian Banks

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CY - Tilburg

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van Soest AHO, Peresetsky A, Karminsky AM. An Analysis of Ratings of Russian Banks. Tilburg: Econometrics. 2003. (CentER Discussion Paper).