US bank supervisors conduct comprehensive inspections of bank holding companies and
assign them a supervisory rating, known as a BOPEC rating prior to 2005, meant to
summarize their overall condition. We develop an empirical model of these BOPEC ratings
that combines supervisory and securities market information. Securities market variables,
such as stock returns and bond yield spreads, improve the model's in-sample fit. Debt
market variables provide more information on supervisory ratings for banks closer to default …

Bank supervisors in the United States conduct comprehensive on-site inspections of bank
holding companies (BHCs) and assign them a supervisory rating meant to summarize their
overall condition. We develop an empirical forecasting model of these ratings that combines
supervisory and securities market data. We find that securities market variables, such as
BHC stock returns and bond yield spreads, improve the model's in-sample fit. We also find
that debt market variables provide more information on supervisory ratings for BHCs closer …