The determinants of UK credit union failure

Jamie Coen (), William Francis () and May Rostom
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Jamie Coen: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 658, Bank of England working papers from Bank of England

Abstract: This paper examines the determinants of credit union failure in the United Kingdom. Using regulatory data on credit unions, we estimate several discrete-time logit models and evaluate their predictive ability at one, two and three-year time horizons. We find that a small set of financial attributes related to capital adequacy, asset quality, earnings performance and liquidity is useful for early identification of troubled credit unions. Both in and out-of-sample results indicate that this parsimonious set of firm-level characteristics, augmented with national and regional unemployment rates, reliably identifies failures while keeping false alarm rates at modest levels. The results provide support for establishing early-warning criteria for supervisory use in monitoring credit unions.

Keywords: Credit unions; failure; early warning; logit; policymaker loss function (search for similar items in EconPapers)
JEL-codes: G21 G28 G38 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-04-21
New Economics Papers: this item is included in nep-ban and nep-dcm
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