Credit Rating of Ebl
Chapter- One
Introduction
1.1 Rationale for the study:
The prediction of credit ratings is of interest to many market participants. Portfolio risk managers often need to predict credit ratings for unrated issuers. Issuers may seek a preliminary estimate of what their rating might be prior to entering the capital markets. For that matter, the rating agencies themselves may seek objective benchmarks as an initial input in the rating process. Understanding the increasingly important role of ratings, especially in the light of Basel II guidelines, consistent and uniform default definition is critical and it has significant impact on the reliability and comparability of ratings across rating agencies.
The Bangladesh financial sector is under going through a phase of transition, transformation and convergence. The regulators are more active than ever before to bring the sector up to an international standard. The competitive environment created with the presence of too many banks in a small economy has also been forcing the Banks to increase risk in both sides of the balance sheet. In the asset side, banks are shifting from traditional financing from sector corporations to private and retail sectors such as financing to small private sector group business, housing, automobile commercial vehicles and SMEs etc. On the liabilities side, the transformation is from passive retail strategy to a very active retail trust to attract and retain customers and increase in deposit base. So all the interested parties of a bank need to understand the creditworthiness of that bank and credit rating most importantly serves this purpose.
As a requirement of the course “F-504: Fixed Income Securities”, this report has been prepared to predict the credit rating of Eastern Bank Limited as an entity.
1.2 Objectives of the Report:
The objectives of this report can be divided into mainly two segments such as:
Overall Objective: The overall objective of the report is to
Introduction
1.1 Rationale for the study:
The prediction of credit ratings is of interest to many market participants. Portfolio risk managers often need to predict credit ratings for unrated issuers. Issuers may seek a preliminary estimate of what their rating might be prior to entering the capital markets. For that matter, the rating agencies themselves may seek objective benchmarks as an initial input in the rating process. Understanding the increasingly important role of ratings, especially in the light of Basel II guidelines, consistent and uniform default definition is critical and it has significant impact on the reliability and comparability of ratings across rating agencies.
The Bangladesh financial sector is under going through a phase of transition, transformation and convergence. The regulators are more active than ever before to bring the sector up to an international standard. The competitive environment created with the presence of too many banks in a small economy has also been forcing the Banks to increase risk in both sides of the balance sheet. In the asset side, banks are shifting from traditional financing from sector corporations to private and retail sectors such as financing to small private sector group business, housing, automobile commercial vehicles and SMEs etc. On the liabilities side, the transformation is from passive retail strategy to a very active retail trust to attract and retain customers and increase in deposit base. So all the interested parties of a bank need to understand the creditworthiness of that bank and credit rating most importantly serves this purpose.
As a requirement of the course “F-504: Fixed Income Securities”, this report has been prepared to predict the credit rating of Eastern Bank Limited as an entity.
1.2 Objectives of the Report:
The objectives of this report can be divided into mainly two segments such as:
Overall Objective: The overall objective of the report is to