Saturday, April 21, 2018   You are here:  Features   Search
  Industry News Minimize
 Print   
  Banks and Credit Ratings
Banks and Credit Ratings

By Khan Vuong

What You Should Know

 

As competitive pressures increase, smaller banks are constantly searching for ways to improve operations. One potential source of improvement is a close look at how their credit ratings affect their business operations.
Model-driven credit quality ratings, based on banks’ regulatory financial filings, have been assigned to every bank in the United States.
Insurance providers, deposit brokers, institutional depositors, inter-bank fund dealers, correspondent bankers and other bank analysts and investors use these non-interactive bank ratings as underwriting guidelines or pricing benchmarks. They all touch on one or more aspect of every bank’s operations, financing, funding, contract negotiation, regulatory compliance and, ultimately, bottom-line profits.
Many smaller U.S. banks have not undergone the extensive process of obtaining an interactive credit rating from one of the full-service rating agencies. An interactive rating considers financial performance, longer-term business strategy, and the softer, qualitative information elements of the bank’s risk management and underwriting process. Thus, an interactive rating often provides a more accurate indication of a bank’s financial standing, simply because the financial performance of any business doesn’t always tell the full story of the operation.
But a model-driven credit rating still has a direct impact on the bottom line of the bank, through the potential for lost opportunities and higher costs of doing business. More importantly, as an independent third-party opinion of the financial condition of a bank, a credit rating carries tremendous significance to regulators and market participants.   

Khanh Vuong is a member of A.M. Best’s Banking Group. He can be reached at (908) 439-2200, ext. 5633. For more information about model-driven and interactive bank ratings, visit www.ambest.com.


Posted on Thursday, March 01, 2007 (Archive on Thursday, March 01, 2007)
Posted by Scott  Contributed by Scott
Return

Rating:
Comments:
Save

Current Rating:
  

Privacy Statement   Terms Of Use   Copyright 2013 The Warren Group    Login