Discussion

Abstract

The three papers I will discuss share a common approach to the data; each looks at an aspect of rating agency evaluations using firm level data. However, they also share another common thread in that each has something important to say about the use of rating agency evaluations for bank supervisory purposes. The Altman and Saunders (2002a) paper directly addresses the use of ratings by examining the extent to which the Basel Bank Supervisors Committee’s proposed new capital accord incorporates the historical loss experience by ratings category. Bongini, Laeven and Majnoni (2002) evaluates the merits of using agency ratings of banks in East Asia during the 1995–98 period relative to the use of accounting data and implied fair values of deposit insurance from bank returns. Packer (2002) alone does not explicitly address bank regulatory questions in his paper comparing the ratings assigned to Japanese corporations by the Japanese rating agencies with those assigned by their principal foreign competitors. Nevertheless, if Packer’s interpretation of the reason for the differences is correct; that has important implications for bank supervisor’s use of ratings.