Rating Performance and Bank Business Models: Is There a Change with the 2007–2009 Crisis?

We investigate the relationship between a bank’s rating and its business model and hypothesize that relationship changed through the crisis. We use bank ratings by Fitch, Moody’s and S&P’s from 2006 to 2009 and proxy the business model via an index given by a banks’ traditional income share in total income. In a sample of 241 listed banks from 39 countries, controlling for sovereign ratings and other bank characteristics, we find that banks with higher values of the index had: (1) similar ratings to other banks until 2007; (2) better rating performance through 2008–2009. The evidence supports our hypothesis.