Quality Index Grading Methodology
The Phoenix-Hecht Bank Quality Index™ is based on thousands of individual bank quality evaluations gathered by the Treasury Management Monitor™ Survey. Any corporation can request the individual product and service grades along with the numeric scores directly from your banker for their institution.
A summary of the letter grades is provided to corporations responding to the Treasury Management Monitor Survey.
The objective of the Quality Index™ is to provide the most reliable predictor of a bank’s performance relative to its peers. Middle market companies tend to rate their banks higher than large corporates. In the middle market, there is somewhat of a halo effect from positive evaluations of credit that also translates into higher evaluations. Larger corporations have more banks to compare and are not as sensitive to credit needs. We account for this with different grade thresholds for each segment.
The Quality Index™ has two elements that can be used to evaluate quality: (a) the numeric score for each question and (b) the letter grade for that question. The numeric score is based on a scale of 1 to 9 with 5 being "Meets Expectations" and 9 being reserved for "Exceptional."
All banks do a very reasonable job of meeting customer expectations. The vast majority of numeric evaluations are in the 5 to 8 range. Higher grades are a reflection of how frequently the bank exceeds its customer’s expectations. However, just as in EPA mileage standards, individual customer experiences may vary.
The letter grade is a reflection of where the bank ranks relative to all other banks in the marketplace based on the distribution of numeric scores. For each of the five groupings, there are numeric ranges that equate to specific letter grades. The Quality Index™ has eight grade categories, with A+ the highest and B the lowest. Finally, for each bank, a grade is calculated and reported only if the variance/sample size passes acceptable parameters.
Grade thresholds are set at a targeted distribution of 20% A+, 20% A, 20% A-, 10% B+, and 20% B. This distribution is applied to each of five distinct groups of questions:
Individual product and service grades along with the numeric scores can be obtained directly from your banker for their institution. We recommend use of the quality grades with existing banks as a starting point for conversations around quality. Quality grades should also be request from potential providers as part of an RFP.