In the current regulatory environment, banks are required to quantify credit risk by means of default probabilities, loss rates conditional on default and expected exposures for a number of purposes: Regulatory capital calculation, loan loss provisioning and stress testing. The nature of each...

Overrides of credit ratings are important correctives of ratings that are determined by statistical rating models. Financial institutions and banking regulators agree on this because on the one hand errors with ratings of corporates or banks can have fatal consequences for the lending...