Abstract
Within the new bank regulatory context, the assessment of the credit risk of financial institutions is an important issue for supervising authorities and investors. This study explores the possibility of a developing risk assessment model for financial institutions using a multicriteria classification method. The analysis is based on publicly available financial data for UK firms. The results indicate that the proposed multicriteria methodology provides promising results compared to well known statistical methods.
Similar content being viewed by others
References
Altman EI, Saunders A (1998) Credit risk measurement: Developments over the last 20 years. J Bank Financ 21:1721–1742
Altman EI, Avery R, Eisenbeis R, Stinkey J (1981) Application of classification techniques in business, banking and finance. JAI Press, Greenwich
Bank of International Settlements (2000) Principles for the management of credit risk. Basel Committee on Banking Supervision, Basel (available at: http://www.bis.org/publ/bcbs75.pdf)
Baesens B, Gestel TV, Viaene S, Stepanova M, Suykens J, Vanthienen J (2003) Benchmarking state-of-the-art classification algorithms for credit scoring. J Oper Res Soc 54:627–635
Dimitras AI, Zanakis SH, Zopounidis C (1998) A survey of business failures with an emphasis on prediction methods and industrial applications. Eur J Oper Res 90:487–513
Doumpos M, Zopounidis C (2002) Multicriteria decision aid classification methods. Kluwer, Dordrecht
Gordy MB (2000) A comparative anatomy of credit risk models. J Bank Financ 24:119–149
Hosmer DW, Lemeshow S (2000) Applied logistic regression, 2nd edn. Wiley, New York
Krahnen JP, Weber M (2001) Generally accepted rating principles: a primer. J Bank Financ 25:3–23
Sahajwala R, Van den Bergh P (2000) Supervisory risk assessment and early warning systems. Working Paper no. 4, Basel Committee on Banking Supervision
Thomas LC (2000) A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers. Int J Forecast 16:149–172
Zopounidis C, Doumpos M (2002) Multicriteria classification and sorting methods: a literature review. Eur J Oper Res 138(2):229–246
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Baourakis, G., Conisescu, M., van Dijk, G. et al. A multicriteria approach for rating the credit risk of financial institutions. Comput Manag Sci 6, 347–356 (2009). https://doi.org/10.1007/s10287-007-0050-3
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10287-007-0050-3