Does the disclosure of unsolicited sovereign rating status affect bank ratings?

Patrycja Klusak, Rasha Alsakka, Owain ap Gwilym

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)
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Abstract

This paper integrates three themes on regulation, unsolicited credit ratings, and the sovereign-bank rating ceiling. We reveal an unintended consequence of the EU rating agency disclosure rules upon rating changes, using data for S&P-rated banks in 42 countries between 2006 and 2013. The disclosure of sovereign rating solicitation status for 13 countries in February 2011 has an adverse effect on the ratings of intermediaries operating in these countries. Conversion to unsolicited sovereign rating status transmits risk to banks via the rating channel. The results suggest that banks bear a penalty if their host sovereign does not solicit its ratings.
Original languageEnglish
Pages (from-to)194–210
JournalThe British Accounting Review
Volume49
Issue number2
Early online date20 Aug 2016
DOIs
Publication statusPublished - Mar 2017

Keywords

  • Bank ratings
  • Rating agency regulation
  • Unsolicited ratings
  • Sovereign-bank rating channel

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