What has op risk to do with ‘credit’ ratings?

The capital adequacy framework of the new Basel Accord was designed to change the way banks manage operational risks. Now, it also looks as though it will alter the way credit rating agencies conduct their evaluations of credit quality in financial institutions.All three of the major credit rating agencies – Fitch Ratings, Moody’s and Standard & Poor’s (S&P) – have struggled over the past three years to figure out how to include op risk in their overall assessment of firms’ creditworthiness.

To continue reading...