Credit Ratings and Complementary Sources of Credit Quality Information

July 2000

In September 1999, the BCBS's Research Task Force formed a working group to collect the available and relevant information on credit ratings in a single document, to be made available to all BCBS groups considering the incorporation of these ratings in the new accord. Given the progressive timetable already in place for revision of the accord, the working group has moved very quickly to address the needs of various drafting and review groups. The result is a lengthy detailed study, which should be helpful to those revising the proposed accord, and more generally to those interested in the use of credit ratings in regulation.

The study contains three main parts, namely, (I) an overview of the ratings industry and of its use in banking regulation, (II) a survey of complementary sources of credit quality information, and (III) a review of studies of the performance of credit ratings. As noted, the focus of the study is on factual information. However, a brief review of the conceptual issues regarding credit ratings is presented in the preface that follows this summary. The preface offers some preliminary thoughts about a possible framework for approaching the factual results. The remainder of the summary reports some of the key findings of the individual sections.