Rating targeting and the confidence levels implicit in bank capital

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Title: Rating targeting and the confidence levels implicit in bank capital
ISBN: 978-952-463-332-2
Author: Jokivuolle, Esa ; Peura, Samu
Organization: Suomen Pankki
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2006
Series number: 27/2006
Year of publication: 2006
Publication date: 8.9.2006
Published in: Published in Journal of Risk, Volume 12, No. 4, 2010, Pages 3-13
Pages: 21 s.
Keywords: pankkitoiminta; vakavaraisuus; pääoma; reittaus; rahoitusrakenne; luottokelpoisuus;
JEL: G21; G32
Abstract: The solvency standards implicit in bank capital levels, as reported eg in Jackson et al (2002), are much higher than those required for top ratings, if standard single period economic capital models are taken seriously.We explain this excess capital puzzle by forward looking rating targeting behaviour by banks, which aims at maintaining rating above a minimum target in future periods.We calibrate to data on actual bank capital the confidence level used by the median US AA rated bank to maintain at least a single A rating.The calibrated confidence level is in line with the historical probability of an AA rated bank to be downgraded below A. Key words: bank capital, credit rating, value-at-risk, economic capital, capital structure JEL classification numbers: G21, G32
Note: Katso myös tekijöiden Rating targeting and dynamic economic capital; Journal of Risk 12 ; 4 ; 2010.
Rights: https://helda.helsinki.fi/bof/copyright

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