Economic Policy Review
Why Do Supervisors Rate Banking Organizations?
Volume 27, Number 3
November 2021

JEL classification: G21, G28

Authors: James Bergin and Kevin Stiroh

This article addresses a question that at first may appear simple: why do supervisors rate banking organizations? Prudential supervisors have a long-standing practice of confidentially rating the condition of the firms that they supervise. These ratings are used for a variety of purposes and can have important consequences. The authors analyze the history and evolution of this practice and consider how the use of ratings advances the statutory and regulatory goals of supervision of banking organizations. They conclude with a discussion of the implications for the design and implementation of bank ratings systems.

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AUTHOR DISCLOSURE STATEMENT(S)
James Bergin
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Kevin Stiroh
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.
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