Tuesday, May 19, 2009

Fitch ratings: A Universal Spreadsheet for Bank Analysis

Introduction: For many years, Fitch Ratings has formatted and analyzed bank data in templates which reflect the idiosyncratic formats of the accounting systems of each of the countries for which it collects bank data. Each template had its own raw data and spreadsheet format. To assist with comparisons across templates, Fitch devised a global representation of this data which attempted to place all the accounting systems on the same basis.

With the adoption of IFRS by the majority of European banks, as well as many Asian and Central American banks, and the gradual convergence of IFRS and US GAAP, Fitch has been able to develop a single spreadsheet for the entire universe of banks which is global, transparent and adaptable. While recognizing that figures are still being reported under different accounting systems and the necessity of an awareness of the implications of different systems, the continuing convergence of accounting systems toward one universal approach renders it possible to make global comparisons more easily and reliably than in the past. The new spreadsheet and ratios are also a better reflection of the way Fitch approaches the analysis of financial statements, tailoring them to fit the needs of analysts, and using information found in the notes to the accounts to adjust the statements. The ways in which Fitch has achieved this are detailed below, as the agency compares the new template with the "global" section of the original presentations.

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