Research Discussion Papers, Bank of Finland
The feasibility of through-the-cycle ratings
Abstract: It has been proposed that the potential procyclicality of
Basel II could be alleviated by using through-the-cycle (TTC) ratings in
IRBA models. A TTC rating would be based on the structural component of the
debtor’s credit risk ignoring cyclical fluctuations. This paper tests for
the existence of such fluctuations in corporate sector credit risk and
finds vietually no evidence for their existence at the company level. It is
not possible to assign satisfactory TTC ratings to debtors if there are no
cyclical variations to be filtered out.
Keywords: through-the-cycle rating; credit risk; procyclicality; (follow links to similar papers)
JEL-Codes: G21; G33; (follow links to similar papers)
32 pages, August 16, 2010
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom