Financial soundness indicators and financial crisis episodes

Maria Kasselaki () and Athanasios Tagkalakis

No 158, Working Papers from Bank of Greece

Abstract: This paper studies the links between of financial soundness indicators and financial crisis episodes controlling for several macroeconomic and fiscal variables in 20 OECD. We focus our attention on aggregate capital adequacy, asset quality and bank profitability indicators compiled by the IMF. Our key findings suggest that in times of severe financial crisis regulatory capital to risk weighted assets is increased (by about 0.5-0.6 percentage points –p.p.) to abide by regulatory and supervisory demands, non performing loans (NPL) to total loans increase dramatically (by about 0.5-0.6 p.p.), but loan loss provisions lag behind NPLs (they fall by about 12.3-18.8 p.p.) and profitability deteriorates dramatically (returns on assets (equity) fall by about 0.3-0.4 (5.0-7.0) p.p.).

Keywords: Bank profitability; capital adequacy; asset quality; financial crisis. (search for similar items in EconPapers)
JEL-codes: E32 E44 E58 E61 E62 G21 G28 H61 H62 (search for similar items in EconPapers)
Pages: 66
Date: 2013-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk and nep-mac
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Citations: View citations in EconPapers (10)

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Journal Article: Financial soundness indicators and financial crisis episodes (2014)
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