Credit analysis


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Credit analysis

Evaluating information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations. Related: Default risk.

Credit Analysis

The process of determining the likelihood of default, especially by a bond issuer. Credit rating agencies conduct credit analysis in order to provide bond ratings; they may change these from time to time. Bond investors likewise conduct credit analysis. For example, if an investor's credit analysis indicates that a bond rating is about to decrease, he/she will be unlikely to invest in that bond, as it will lead to locking in a lower interest rate at a higher level of risk. On the other hand, if credit analysis shows that a bond rating is about to increase, an investor will be more inclined to buy that bond, as it provides a lower level of risk while also giving him/her a higher coupon. See also: Investment-grade, Junk.
References in periodicals archive ?
National Cooperative Bank (NCB) announced that Sandra Braun has joined the bank as vice president, heading the Commercial Loan Underwriting and Credit Analysis Team.
The XBRL activity that will have widespread impact on CPAS in the near term is Bank of America's pilot-testing of XBRL reporting by their commercial loan customers who provide financial statements for lending and credit analysis purposes.
These are, first, the adequacy of banks' credit analysis processes; second, the effectiveness of exposure measurement; and third, the role of stress testing of counterparty exposure.
There is a question whether adequate credit analysis was performed by creditors of Long-Term Capital, which needs to be examined carefully during the next few weeks.

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