Financial Soundness Indicators and Banking Crises

Matias Costa Navajas and Aaron Thegeya

No 2013/263, IMF Working Papers from International Monetary Fund

Abstract: The paper tests the effectiveness of financial soundness indicators (FSIs) as harbingers of banking crises, using multivariate logit models to see whether FSIs, broad macroeconomic indicators, and institutional indicators can indeed predict crisis occurrences. The analysis draws upon a data set of homogeneous indicators comparable across countries over the period 2005 to 2012, leveraging the IMF’s FSI database. Results indicate significant correlation between some FSIs and the occurrence of systemic banking crises, and suggest that some indicators are precursors to the occurrence of banking crises.

Keywords: WP; banking crisis; return on equity; banking; return on assets; Financial soundness indicators; banking crises; macroprudential analysis; NPL ratio; FSI data; crisis country; core FSI indicator; Nonperforming loans; Personal income; Global (search for similar items in EconPapers)
Pages: 38
Date: 2013-12-23
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Citations: View citations in EconPapers (15)

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