Keywords

bank leniency, loan classification, Rasch model, multiple borrowers, commercial bank supervision

This research aims to analyse differences in the credit risk classification amongst commercial banks. Placement classification systems used by banks cannot be thoroughly examined without a detailed knowledge of the actual quality of individual placements, and no regulator has the opportunity to gain such an insight into loan portfolios. This research presents a somewhat roundabout approach, based on a comparison of differences in placement classification of a common portfolio, using the Rasch model to assess the relative strictness of banks. In addition to providing valuable information for the performance of the supervisory function, the results can also aid the assessment of financial stability in the banking system, as they allow quick evaluation of risk management practices in the banking system and detecting outlying banks.