Predicting Bank Financial Strength Ratings in an Emerging Economy: The Case of Turkey

The recent global financial crisis shows us that the rating of bank’s financial strength can be very misleading. As the credibility of the credit rating agencies has been shaken, the objectivity of the credit rating agencies has been questioned. Based on this observation, we investigate whether the forecast of the rating of bank’s financial strength using the publicly available data is consistent with those of the credit rating agency. The data of Turkish banks is used for this investigation. Furthermore, we identify the variables that play an important role in assigning these ratings. For this purpose, we used quantitative proxies for some qualitative factors that are used by Moody’s. The important factors in these ratings are profitability (measured by return on equity), efficient use of resources, and funding of businesses and households instead of government.  

ملخص