Rating Models and Validation - Oesterreichische Nationalbank

Rating Models and Validation
Chart 8: Excerpt from a Classic Rating Questionnaire
3.1.2 Qualitative Systems
In qualitative systems, 11 the information categories relevant to creditworthiness
are also defined on the basis of credit expertsÕ experience. However, in contrast
to classic rating questionnaires, qualitative systems do not assign a fixed number
of points to each specific factor value. Instead, the individual information categories
have to be evaluated in qualitative terms by the customer service representative
or clerk using a predefined scale. This is possible with the help of a
grading system or ordinal values (e.g. Ògood,Ó Òmedium,Ó ÒpoorÓ). The individual
grades or assessments are combined to yield an overall assessment. These
individual assessment components are also weighted on the basis of subjective
experience. Frequently, these systems also use equal weighting.
In order to ensure that all of the users have the same understanding of assessments
in individual areas, a qualitative system must be accompanied by a userÕs
manual. Such manuals contain verbal descriptions for each information category
relevant to creditworthiness and for each category in the rating scale in order to
explain the requirements a borrower has to fulfill in order to receive a certain
rating.
In practice, credit institutions have used these procedures frequently, especially
in the corporate customer segment. In recent years, however, qualitative
systems have been replaced more and more by statistical procedures due to
improved data availability and the continued development of statistical methods.
One example of a qualitative system is the BVR-I rating system used by the
Federal Association of German Cooperative Banks (shown below). This system,
however, is currently being replaced by the statistical BVR-II rating procedure.
The BVR-I rating uses 5 information categories relevant to creditworthiness,
and these categories are subdivided into a total of 17 subcriteria (see
chart 9).
11 In contrast to the usage in this guide, qualitative systems are also frequently referred to as expert systems in practice.
34 Guidelines on Credit Risk Management