Using Credit Ratings for Capital Requirements on Lending to Emerging Market Economies: Possible Impact of a New Basel Accord
By Brieuc Monfort, C. Mulder. Social Science Research Network, 2000
154 citations recorded by the source corpus.
The Basel Committee on Banking Supervision has proposed linking capital requirements for bank loans to ratings by commercial credit rating agencies. Estimates for 20 emerging market economies show that sovereign ratings react procyclically to crisis indicators. Ratings deteriorate if the real effective exchange rate depreciates, in contrast with the positive effect on overall debt service capacity depreciations are normally supposed to have. Simulations show that linking capital requirements to ratings would have drastically increased these requirements during the crisis periods after decreasing them in the run up to the crises. Simulations suggest modest efficiency gains of using sovereign credit ratings for capital requirements on emerging market lending.
Subfields: Finance, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/aa9d32df547df6a3905ba75f15a6bf8e942efbb8
Citations in the corpus
- Country Risk Assessment: A Guide to Global Investment Strategy (2003, unknown): “” Monfort and Mulder (2000) investigate the Basel proposal for a new capital adequacy framework33”
- Rating the Rating Agencies: Anticipating Currency Crises or Debt Crises? (2003, unknown): “A number of studies (Cantor and Packer, 1996; Haque et al., 1996; Juttner and McCarthy, 1998; Monfort and Mulder, 2000) have found a close association between credit ratings and a reduced number of macroeconomic variables.”
- The estimation of transition matrices for sovereign credit ratings (2002, unknown): “…examined determinants (i) of sovereign ratings (see Cantor and Packer (1996), Haque, Kumar, Mark and Mathieson (1996), Juttner and McCarthy (1998), Monfort and Mulder (2000)), (ii) of sovereign defaults (see Edwards (1984)), and (iii) of spreads on sovereign debt (see Burton and Inoue (1985),…”
- What 'Hides' Behind Sovereign Debt Ratings? (2007, unknown): “Using OLS analysis on a numerical representation of the ratings is quite simple and allows for a straightforward generalization to panel data by doing fixed or random effects estimation (Monfort and Mulder, 2000; Eliasson, 2002 and Canuto et al., 2004).”
- A Survey of Cyclical Effects in Credit Risk Measurement Models (2002, unknown): “However, if credit ratings behave procyclically [as shown by Ferri, Liu and Majnoni (2000), Monfort and Mulder (2000) and Reisen (2000)], then even the proposed standardized approach in the BIS New Capital Accord will exhibit cyclical fluctuations in capital requirements. 2 Borio, Furfine and Lowe (”
- Which factors determine sovereign credit ratings? (2006, unknown): “Jüttner and McCarthy (2000) and Monfort and Mulder (2000) confirmed the results of Cantor and Packer, but they noticed that the explanatory power of this study deteriorates in 1997 due to the financial crises of the emerging markets (Thailand, Russia and Brazil, for example).”
- A NON-RECURSIVE REGRESSION MODEL FOR COUNTRY RISK RATING (2003, unknown): “Monfort and Mulder (2000) claim that membership in the OECD is likely to be a significant indicator for country risk ratings.”