Function

• Bank ratings determine the overall success of a bank's different activities. Banks with poor ratings are determined to be in need of outside attention to prevent failure.
  
  

System

• According to investopeida.com, supervisory authorities base the rating on six factors. Other independent companies perform a battery of tests to score the rating.
  
  

Factors

• A few areas banks receive a rating score on include earnings, liquidity and capital. The quality of the bank's assets and management are also assessed. These and other factors are then complied to produce a comprehensive rating score.
  
  

Test Battery

• The bank rating is determined after a series of analytic tests of the factors previously above. Each different factor is given a score. These scores are then compiled together to create the bank's rating.
  
  

Rating Scales

• The independent rating company performing the tests usually has its own rating scale. Some companies use a point system, while others grade with letters. The description of scoring should be disclosed to the bank at the time of the rating.