KBRA’s rating methodology is both quantitative and qualitative. The KBRA quantitative rating criteria derive a financial rating based on key financial ratios. Absolute tests determine if there is a significant difference between a current ratio and the ratio value for a normal period and the levels of financial soundness for each bank. The purpose of these tests is to identify a significant deterioration in the financial soundness of a bank.
The quantitative analysis is then followed by a qualitative analysis conducted by a team of financial analysts. The institution’s financial condition is reviewed each quarter by at least two analysts based on specific variables, industry trends and peer group information, significant financial changes, existence of enforcement actions, and other available information.
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