How We Can Check Credit Worthiness Of Banks

1237 words - 5 pages

1. Introduction
2. Definition Contents

3. Credit rationing methodologies
3.1: Agency methodologies
3.2: Table of creditworthiness methodologies
3.3: Loss concept
4. Creditworthiness process
5. Morningstar Global Bank Credit Rating Methodology
6. Stages of creditworthiness

1. Introduction

Credit rating agencies (CRAs) formulate and issue credit ratings for both companies (debt issuers) and individual debt instruments. Issuer’ rating represents a forward-looking assessment of the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Therefore, ...view middle of the document...

However, less liquid banks are found to have higher ratings and the resultsshow no strong relationship between banks’ credit ratings and each of asset quality, capital adequacy ratios and leverage. So he credit rationing of banks should be strong as well as better.

2. Definition of 'Credit Worthiness'

An assessment of the likelihood that a borrower will default on their debt obligations. It is based upon factors, such as their history of repayment and their credit score. Lending institutions also consider the availability of assets and extent of liabilities to determine the probability of default.
Know we are going to explain creditworthiness of banks in different cases.
3. Rating methodologies for banks
3.1 Agency methodologies
This section discusses sequentially the rating methodologies of the three major rating agencies. The discussion is condensed in Table 1.


3.2:Creditworthiness methodologies.

3.3:Loss concept
As earlier noted, an important aspect of any credit risk rating system is the loss concept used to differentiate the riskiness of different credit exposures, ie whether the ratings are one- or two-dimensional in form and whether they focus primarily on PD, LGD, EL or all three credit risk measures.
All 10 of the surveyed Australian banks utilise two-dimensional rating systems. In rating their credit exposures, each of these banks determines a separate customer-level PD rating, a facility-level LGD rating and a composite EL rating
Generally speaking, as internal credit risk ratings have been applied to a wider range of more sophisticated uses, so too has the need for more accurate, more differentiated and morequantitative measures of risk.
• By separately assessing default risk and loss given default, two-dimensional systems (and composite rating systems in particular) can:
• improve communication about risk (including by conveying more detailed information about risk profiles and by reducing potential ambiguity over the meaning of risk grades);
• lessen the tendency at some banks to rate primarily on the strength of available security;
• facilitate the development of rating tools to assist in the risk rating process;
• facilitate tracking of the accuracy of risk ratings;

4. Creditworthiness process
5. Morningstar Global Bank Credit Rating Methodology
Credit Score
Like the Morningstar credit rating for nonfinancial companies, the bank credit rating methodology is driven by four key components, or pillars:
1. Bank Solvency Score(30% weighting) is a ranking based on a bank's capital adequacy, asset quality, earnings power, and liquidity profile.
2. Bank Stress Test Score(30% weighting) is an evaluation of a bank's potential to absorb loan losses while maintaining adequate capital levels.
3. Bank Business Risk Score(30% weighting) encompasses various measures of business risk, as well as Morningstar's proprietary Economic Moat and Uncertainty Ratings.
4. Distance...

Other Essays Like How We Can Check Credit Worthiness of Banks

We Can Benefit from the Legalization of Marijuana

2310 words - 10 pages We Can Benefit from the Legalization of Marijuana Krysti Barbour Rogue Community College We Can Benefit from the Legalization of Marijuana The legalization of marijuana is a highly controversial topic that has a lot of people confused as to where they stand. There are some people, who are completely against the legalization of an herbal remedy that, by most standards, is safer than the majority of available over the counter medications

How far can we rely on the knowledge available to us through perception?

515 words - 3 pages Perception is the knowledge we gain through our senses. This essay is to discuss the value of knowledge we get through hearing, feeling, seeing, smelling and tasting.There is no doubt that humans can survive without some of these tools. Losing one, for example sight, makes the others stronger. But what if you had to do with none of these but one? We can be tricked in every one of these. Sight is probably one of the most important senses for many

Examples Of How Set Can Communicate The Dance's Ideal Concept

1522 words - 7 pages Examples of How Set Can Communicate the Dance's Ideal Concept When a dance piece is created, it is not just the choreography of the steps that needs to be considered. To make a successful piece, firstly a starting point needs to be found, this can be anything ranging from an emotion, an animal, or even someone's journey to work or school. When this has been decided upon, there are five main areas that need to be concentrated on. These

How One Area of a Childs Development Can Affect Another

746 words - 3 pages Unit 201 Outcome 1.2 Give examples of how each area of a childs development can affect another area. (my own interpretation of examples) When a child is developing correctly this they will know as many of the children around will be at very similar stages, but for a child that isn’t developing at the same speed they may feel less confident or their self worth wont be as great, this will take effect on a child throughout all aspects of the

To What Extent Can We Attribute Responsibility for Instances of Persecution in History to the Influence of Powerful Individuals?

3200 words - 13 pages value of life then is hard to quantify with how we now view it. A further defence of his actions in Aquitaine was that he may have been defending what he rightly felt to belong to him and therefore felt that the persecution of those that stood against him was justified. It has however been further argued that his persecutory actions throughout the Holy Lands was indefensible. He cold-heartedly murdered defenceless prisoners, which was a repetition of

How Can the Way in Which We Organize Our Thinking by Using Mental Images, Concepts and Schema Help Us Improve Our Memory?

1020 words - 5 pages How Can The Way In Which We Organize Our thinking By Using Mental Images, Concepts And Schema Help Us Improve Our Memory? In this assignment I will discuss that there are ways in which we can organize the way we think and improve our memory, first I will talk about the use of mental images moving on to discussing different concepts and finally incorporating structured pre conceived ideas (schemas). Mental images or iconic thought , is your

How Can Memory Be Improved by the Use of Mental Images, Concepts and Schemas (Which Can Help to Organise Thinking?

1126 words - 5 pages Y183 TMA01 Task 1 Part B This essay will examine how the use of mental images, concepts and schemas play a vital part in the way our memory can be improved. The first way we can improve our memory is by using mental images. A Mental image is an image that helps us to memorise information by making a mental picture of it. The more distinct the image, the easier it is for our memory to recall it. Numerous experiments have been carried

How to Make a Wifi Antenna Out of a Pringles Can

1137 words - 5 pages How To Make A WiFi Antenna Out of A Pringles Can Wi-Fi has completely changed the way we browse the net and use the internet in our day to day life. The complete comfort of accessing internet at better speeds is achieved through Wi-Fi networks. This article explains how to make a WiFi antenna out of a Pringles can, which you can use to boost your Wi-Fi network speeds. Here is the procedure : What is Cantenna? In order to boost your Wi-Fi

How Can Adjust the One-off Air Pressure of Rotary Kiln?

537 words - 3 pages bigger the resistance that the blower needs to overcome will be, which has higher requirement for the performance of the blower and the electricity consumed by the blower will be higher, so that it is necessary to reasonably adjust the one-off air pressure. No matter what type of blower, change the air amount, the air pressure will be changed. As for the question of how to coordinate them both, we need to not only be careful when choosing the

THE STRATEGIC ROLE OF BRANDING IN BUSINESS SUCCESS How Brand Identity Can Be Developed

4303 words - 18 pages AbstractThis coursework seeks to demonstrate how branding fits into a company overall business activities, and how its strategic importance has not only remoulded the very concept of brand but also creating brand identity and brand equity. Within the confine of the Urde's Brand Orientation model, the author uses the car brand- Jaguar to elucidate how brand identity is developed.BRANDINGWhether we are willing to admit it or not, brands help us

The Evolution of Procurement: How Cpos Can Drive Real Competitive Advantage

2440 words - 10 pages | | | |Crossing the contractual chasm: using contract management automation to improve organizational relationships The evolution of procurement: How CPOs can drive real | | | |competitive advantage, � la Darwin Training and development for competitive advantage - best-in-class practices From the front line... | | | |[pic

Related Papers

How Can We Explain Conformity? Essay

3027 words - 13 pages How can we explain conformity? Draw on at least two examples Scott and Marshall (2005) explain conformity with people’s attempts on complying with other’s norms and rules in order to fulfill their expectations. But is it really that simple? Conformity is one of these terms in sociology that have too much different tones and shades, and thus requires deep examination. This essay looks at in detail at a number of classical studies on the

How Can We Strengthen Children's Self Eseem?

1911 words - 8 pages say will raise or lower the children's self-esteem. How we feel about ourselves affects the way we act and how children feel about themselves affects the way they act. Moreover, how children and we feel and think about ourselves can change with time. Self-esteem can be defined as feelings of capability combined with feelings of being loved, knowing we are valued for what we are. Self-esteem means that one’s image of oneself includes a sense

How We Can Strength Pakistan Economy

2356 words - 10 pages of Germany & Pakistan. Despite, we have seen many turmoil & upheavals especially on economic front, but i am optimistic that our government is being able to overcome all these problems. We all should be a strong believer that world is now a global village & the economic turmoil which we are observing since last 3 years, is not only affecting Pakistan, but almost 1/3rd of the world. The U.S. economy was showing signs of positive growth, compared

How Can We Distinguish Between Science And Pseudo Science?

675 words - 3 pages processes on how stars are formed by the fusion of hydrogen and helium to create a sphere of plasma, and how these stars can shine together to form patterns that we see in the night sky as constellations. However, it seems scientifically implausible on the other hand in explaining how constellations can give people certain characteristics when they are born under a certain star sign. Astrology as a pseudo-science, compared to astronomy, which is