Bank Safety Ratings  

Bank Safety Ratings are a way to measure the liquidity and financial state of a bank or financial institution. This gives an indication of how likely a bank is to go bankrupt leaving savers with prospect of losing their money.

• Bank Safety Ratings Depend upon
• Ratio of assets to liabilities
• Rate of defaults on mortgages and loans
• Ratio of loans to asset value
• Liquidity Ratio

In the credit crisis of 2008, the bank safety ratings fell for many banks because

1. Falling asset prices increased the loan to value rate
2. Increased mortgage default led to higher liabilities.
3. Shortage of credit in the system caused banks to suffer liquidity shortages

Related Essays and Revision Notes

• Banks UK
• Bank Rate.com safe and sound ratings

 

• Economics Help - Revision Guide
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• Economics Dictionaryat Amazon.com