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