As the economy moves from a period of high growth to a period of low growth, a rating produced using a point-in-time approach is more likely to change than a rating produced using a through-the-cycle approach.

A bank's internal ratings are more likely to be produced using a through-the-cycle approach, while ratings from external agencies are more likely to be produced using a point-in-time approach.

External rating agencies use outlooks to indicate a near-term change in a rating, while using watchlists to indicate a medium-term change in a rating.

Banks typically produce internal ratings based solely on a set of financial ratios related to the borrower's leverage and earnings