Internal rating method under Basel Criteria II and an application

Basel criteria II offer a system which includes criterion that must be followed for strengthening financial structure of bank and managing their risks. Banks determine their possible risks and they calculate their capital adequacy ratio according to this.Internal rating methods which used for measuring credit risk that is necessary for calculating capital adequacy ratio mentioned in Basel criteria is focused on in this study. Apart from this, specifications by rating of ability to pay back on time their principal and interests of loans companies borrowing through bank loans were aimed. In the other words, we try to appoint level of risk undertaken by banks who invest by give a loan to companies.Hybrid method is used in this study for ratingUnderlying information about the company is taken from the İMKB?s web site.Keywords: Basel Criteria, Credit Risk, Standard Method, Internal Rating Method, Capital Adequacy Ratio, Risk Management