The adjustment of bank ratings in the financial crisisinternational evidence

Resumen

This paper analyses the adjustment occurring in the ratings of the banks of the United States and the European Union as a result of the financial crisis. It uses a methodology that permits decomposition of the observed change in the rating into an effect associated with the change in the agencies� rating policies and into another effect associated with the banks� asset situation. The results obtained show that with the crisis there was a generalised fall in the ratings. This fall is due both to a worsening of the banks� asset situation and to the hardening of rating policies. Specifically, we find that in Fitch 79.66% and in Standard and Poor�s 63.93% of the fall in the rating is due to a hardening of the rating policies, while in Moody�s the steep worsening of the banks� asset situation is offset by a slight improvement in the rating criteria. These changes suggest a procyclical behaviour in Standard and Poor�s and Fitch, and conversely a through the cycle behaviour in Moody�s.