Embracing Expert Approaches in Modern Credit Rating Modelling

Over the last thirty years, supervisory regulations have pushed banking institutions to adopt credit rating models that are based almost exclusively on quantitative and retrospective predictive variables, such as financial ratios and explanatory indicators of past performance in the bank-firm relationship. However, the “new normal” of uncertainty requires that these models evolve towards expert approaches, capable of capturing the onset of business weaknesses before they manifest at the economic and financial level. This means incorporating new, more forward-looking variables that are essentially qualitative in nature, reflecting the inherent strategic and managerial characteristics of the company.